[SMM Stainless Steel Daily Review] SS futures center moved up, spot stainless steel market sentiment recovered

SMM reported on August 4 that SS futures displayed an overall run of shot up and tested higher levels. Near the close of the night session, driven by capital operations, SHFE nickel and SS futures shot up rapidly. Although SS pulled back somewhat at the morning open, it had significantly moved higher overall. By the close, the most-traded SS contract settled at 14,470 yuan/mt. In the spot market, lifted by the rally in SS futures, although steel mill spot guidance prices remained stable, stainless steel agents and traders all increased their offers, market activity improved somewhat, and inquiry and deal performance was moderate.

SS futures, the most-traded contract. At 10:15 a.m., SS2609 was at 14,870 yuan/mt, up 345 yuan/mt from the previous trading day. Spot premiums for 304/2B in Wuxi were in the 200-550 yuan/mt range. In the spot market, the average price of Wuxi cold-rolled 201/2B coil was stable; for cold-rolled 304/2B coil with raw edges, the Wuxi average price rose 50 yuan/mt, and the Foshan average price rose 75 yuan/mt; Wuxi cold-rolled 316L/2B coil price was flat; hot-rolled 316L/NO.1 coil, Wuxi offers were flat; cold-rolled 430/2B coil in both Wuxi and Foshan was flat.

This week, macro sentiment turned bearish, dominating the metal market trend, and stainless steel futures were under pressure overall, consolidating on a subdued note. This week, the US Fed's FOMC meeting kept rates unchanged as expected, but its overall stance was hawkish, putting broad pressure on commodity valuations, and the nonferrous metals sector weakened collectively. Dragged by the macro headwinds sentiment transmission, SS futures followed suit and consolidated on a subdued note, with the trading center moving slightly lower, and overall market trading sentiment was cautious. On the spot and inventory front, the pullback in futures combined with off-season demand weakness kept downstream procurement cautious, but steel mills held prices firm, cost support, and reasonable inventory levels underpinned spot prices, resulting in a divergence of weak futures and stable spot. The market is currently in the traditional consumption off-season, where end-user rigid demand is already relatively weak, and combined with consecutive pullbacks in SS futures during the week continuing to hit market confidence, downstream end-user wait-and-see sentiment deepened, willingness to purchase continued to weaken, and spot transactions overall were in the doldrums. However, spot prices did not follow the futures' sharp decline. First, mainstream stainless steel mills' determination to hold prices firm remained strong, stabilizing the market quotation anchor from the factory gate; second, previous spot prices had been relatively stable, the buildup of social inventory was limited and remained within a reasonable range, with no significant inventory overhang pressure, effectively mitigating the downside risk for spot; third, month-end centralized NPI procurement by mills, marginal recovery in raw material demand drove nickel pig iron prices higher, and the cost side provided rigid support for stainless steel spot. Multiple factors jointly pushed spot offers to stay steady in the short term. On the cost and profit side, this week's marginal rise in raw material prices combined with steady spot prices narrowed steel mills' smelting profits, slightly compressing industry profit margins. Month-end stainless steel mills started NPI purchases, driving high-grade NPI prices higher, raw material cost centers shifted upward, while spot prices of finished products remained stable under off-season demand constraints, and the price spread between finished products and raw materials narrowed, causing steel mill profits to come under pressure and pull back in stages. Although profits shrank, the industry overall maintained positive profits, and the production side did not face significant loss pressures. Overall, this week's stainless steel market showed a structural pattern where macro factors pressured futures, spot prices relied on costs and price-holding to stabilize, and profits slightly narrowed. Short-term spot resilience is sufficient, but long-term fundamental pressures are gradually accumulating. Steel mills that previously cut or stopped production are resuming production, industry supply is steadily recovering, August stainless steel production 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. Expectations of loose supply-demand conditions are heating up, posing sustained downward pressure on subsequent stainless steel prices. In the short term, the market will maintain a divergent trend with futures remaining weak and spot prices consolidating and holding steady. Subsequent 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 progress, and raw material cost fluctuations.