SS Futures Pull Back, Stainless Steel Spot Trades Remain Weak [SMM Analysis]

According to SMM's August 1 report, SS futures broadly declined and pulled back. Dragged down by the SHFE nickel pullback, SS futures fell in tandem, with the most-traded SS contract closing at 14,470 yuan/mt. In the spot market, SS futures markedly weakened. Although NPI prices recently held up well, limiting stainless steel spot price fluctuations given cost support, market inquiries and transactions weakened further, with some agents lowering prices to take orders.

SS futures most-traded contract. At 10:15 a.m., SS2609 was at 14,525 yuan/mt, down 185 yuan/mt from the previous trading day. Spot premiums for 304/2B in the Wuxi area were in the 445-895 yuan/mt range. In the spot market, Wuxi cold-rolled 201/2B coil average price was steady; Wuxi cold-rolled 304/2B coil average price fell 25 yuan/mt, and Foshan fell 25 yuan/mt; Wuxi cold-rolled 316L/2B coil price fell 100 yuan/mt; Wuxi hot-rolled 316L/NO.1 coil price was flat; cold-rolled 430/2B coil prices in both Wuxi and Foshan were flat.

This week, macro sentiment turned bearish, dictating the trend in metals, with stainless steel futures broadly under pressure and consolidating on a subdued note. The US Fed kept rates unchanged as expected at its meeting this week, but its overall stance tilted hawkish, broadly weighing on commodity valuations, with the nonferrous metals sector weakening across the board. Contagion from the bearish macro mood dragged SS futures down in tandem, consolidating on a subdued note; the price center shifted lower amid a generally cautious trading atmosphere. In spot and inventory, the futures pullback and off-season demand softness kept downstream purchases cautious, but steel mills holding prices firm, cost support, and reasonable inventory levels underpinned spot prices, creating a divergence of weak futures and steady spots. The market is currently in the traditional consumption off-season, with end-user rigid demand already relatively thin. Additionally, the successive SS futures decline during the week continuously eroded market confidence, intensifying downstream end-user wait-and-see sentiment and further sapping buying willingness, leaving on-site spot transactions broadly in the doldrums. Yet spot prices did not follow futures sharply lower. First, mainstream stainless steel mills remained resolutely determined to hold prices firm, stabilizing the market quote center at the ex-factory level. Second, spot prices had been relatively stable earlier, and social inventory buildup was modest, staying within a reasonable range without significant destocking pressure, effectively mitigating downside spot risks. Third, concentrated NPI purchases by steel mills at month-end marginally revived raw material demand, lifting NPI prices, while the cost side provided rigid support to stainless steel spots. These multiple factors jointly kept spot quotes steady in the short term. On the cost and profit side, marginal rises in raw material prices this week, coupled with steady spot prices, narrowed smelting profits at steel mills, slightly squeezing industry 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.