[SMM Stainless Steel Daily Review] SS futures consolidate on a strong note, month-end spot stainless steel sees sluggish high-priced transactions.

According to SMM on July 31, SS futures overall consolidated on a strong note. Buoyed by the US dollar index’s consecutive pullbacks, non-ferrous metal futures overall strengthened, with SS rising in tandem. The most-traded SS futures contract closed at 14,635 yuan/mt. In the spot market, SS futures shot up in early morning trading before gradually pulling back and consolidating. Although the morning's firmer futures led to higher spot quotes, deals at elevated prices did not go smoothly. Some traders offered concessions amid month-end shipment pressure, with market transactions dominated by just-in-time procurement.

The most-traded SS futures contract. At 10:15 a.m., SS2609 stood at 14,710 yuan/mt, up 110 yuan/mt from the previous trading day. Spot premiums for 304/2B in Wuxi were in the 310-710 yuan/mt range. In the spot market, Wuxi cold-rolled 201/2B coil averaged a 100 yuan/mt increase; the average price for cold-rolled 304/2B coil, raw edge, rose 50 yuan/mt in Wuxi and 25 yuan/mt in Foshan; cold-rolled 316L/2B coil prices in Wuxi were unchanged; quotes for hot-rolled 316L/NO.1 coil in Wuxi were unchanged; cold-rolled 430/2B coil prices in both Wuxi and Foshan were unchanged.

This week, a shift in macro sentiment to a bearish tone dominated metal price trends, with stainless steel futures overall under pressure and consolidating on a subdued note. This week, the US Fed’s FOMC meeting kept interest rates unchanged as expected, but its overall stance leaned hawkish, broadly weighing on commodity valuations. The non-ferrous metals segment collectively weakened, and SS futures followed suit, consolidating on a subdued note amid the transmission of macro headwinds. The center of futures shifted lower, and the overall market trading atmosphere turned relatively cautious. In terms of spot and inventory, the futures pullback, combined with off-season demand weakness, kept downstream procurement persistently cautious. However, steel mills holding prices firm, cost-side support, and a reasonable inventory structure underpinned spot prices, leading to a divergence where futures were weak while spot remained stable. The market is currently in the traditional consumption off-season, with inherently relatively thin end-user demand. Moreover, consecutive pullbacks in SS futures this week continued to dent market confidence, intensifying downstream end-users’ wait-and-see sentiment. Willingness to purchase kept weakening, and on-site spot transactions were in the doldrums. However, spot prices did not follow futures down significantly. First, mainstream stainless steel mills’ determination to hold prices firm remained resolute, stabilizing the market quotation reference price at the ex-factory level. Second, spot prices had been relatively stable previously, and social inventory buildup was limited, staying within a reasonable range overall with no significant overstock pressure, effectively mitigating spot downside risks. Additionally, month-end concentrated NPI purchases by steel mills drove a marginal recovery in raw material demand, pushing nickel pig iron prices upward. The cost side provided stiff support for stainless steel spot prices. Multiple factors jointly kept spot quotes stable in the short term. On the cost and profit fronts, marginal increases in raw material prices this week, coupled with stable spot prices, narrowed smelting profits for steel mills, slightly compressing the industry's profitability margins. At month-end, stainless steel mills started NPI purchases, driving high-grade NPI prices to move up somewhat, causing the raw material cost center to shift higher. Meanwhile, finished product spot prices remained stable, constrained by off-season demand, and the price spread between finished products and raw materials contracted, leading to periodical profit pressure and pullback for steel mills. Although profitability contracted somewhat, the industry overall maintained positive profits, and the production side did not experience significant loss pressure. Overall, this week, the stainless steel market presented a structural pattern where macro factors weighed on futures, spot prices were supported by costs and price-holding efforts, and profits contracted slightly. Short-term spot resilience is sufficient, but long-term fundamental pressures are gradually accumulating. Previously suspended or reduced production steel mills are resuming production, industry supply is steadily being restored, stainless steel production in August is expected to rise further, and supply growth is gradually being released. In contrast, downstream off-season demand is unlikely to see a substantial recovery in the short term, supply-demand easing expectations are heating up, forming continuous downward pressure on subsequent stainless steel prices. The short-term market will maintain a divergent trend where futures remain weak and spot prices stabilize with consolidation. Subsequently, key focus should be on tracking US Fed policy expectation changes, SS futures fluctuation pace, downstream off-season rigid demand recovery strength, steel mill production resumption implementation progress, and raw material cost fluctuation situations.