[SMM Stainless Steel Daily Review] SS futures price retreated after a rapid rise, stainless steel spot trades cooled.

According to SMM on August 5, SS futures overall pulled back, ending yesterday's shot-up and following SHFE nickel's sharp decline. As of closing, the SS most-traded contract settled at 14,475 yuan/mt. In the spot market, dragged by SS futures' renewed decline, market trading sentiment turned notably weak, traders lowered their quotations accordingly, and under the sentiment of rushing to buy amid continuous price rise and holding back amid price downturn, transactions turned notably dull.

SS futures most-traded contract. At 10:15 AM, SS2609 was at 14,480 yuan/mt, down 390 yuan/mt from the previous trading day. Spot premiums for 304/2B in Wuxi were in the range of 490-890 yuan/mt. In the spot market, the average price of cold-rolled 201/2B coils in Wuxi held steady; for cold-rolled raw-edged 304/2B coils, the average price in Wuxi fell 75 yuan/mt, and in Foshan fell 75 yuan/mt; the price of cold-rolled 316L/2B coils in Wuxi remained flat; hot-rolled 316L/NO.1 coils, quotations in Wuxi were flat; cold-rolled 430/2B coils in both Wuxi and Foshan were flat.

This week, macro sentiment turned bearish, dominating the trend of the metals market, with stainless steel futures overall consolidating on a subdued note under pressure. This week, the US Fed maintained rates unchanged as expected, but the overall tone was hawkish, putting commodity valuations under pressure generally, and the nonferrous metals sector weakened collectively. Affected by the spillover of macro headwinds, SS futures followed suit and consolidated on a subdued note, with the center of futures shifting downward, and the overall trading sentiment cautious. In terms of spot and inventory, the pullback in futures combined with off-season demand weakness kept downstream purchases cautious, but with steel mills holding prices firm, cost support, and reasonable inventory levels underpinning spot prices, the market showed a divergence of weak futures and stable spot. The market is in the traditional consumption off-season, with terminal rigid demand already relatively weak. Coupled with consecutive pullbacks in SS futures this week continuing to hit market confidence, downstream end-users' wait-and-see sentiment deepened, purchase willingness 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 remained firm in holding prices, stabilizing the market quotation center from the factory side; second, previous spot prices stayed relatively stable, and the market's social inventory buildup was limited, remaining in a reasonable range, with no evident inventory overhang pressure, effectively alleviating spot downside risks; additionally, at month-end, steel mills concentratedly initiated NPI purchases, with marginal recovery in raw material demand driving up nickel pig iron prices, and cost side providing solid support to stainless steel spot, with these multiple factors jointly pushing spot quotations to stay stable in the short term. Cost and profit side, this week, marginal increases in raw material prices combined with stable spot prices narrowed steel mills' smelting profits, slightly compressing industry profitability. At month-end, stainless steel mills initiated NPI purchases, driving up high-grade NPI prices, with the center of raw material costs shifting upward. Meanwhile, finished product spot prices stayed stable due to off-season demand constraints, narrowing the price spread between finished products and raw materials, and causing mills' periodic profits to pull back under pressure. Although profits narrowed, the industry overall maintained positive earnings, and the production side did not face significant loss pressures. Overall, this week the stainless steel market exhibited a structural pattern of macro factors weighing on futures, spot stainless steel supported by costs and price-firming efforts, and modestly shrinking profits. In the short term, spot stainless steel has ample resilience, but fundamental pressures are gradually building in the longer term. Steel mills that previously curtailed or halted production are successively resuming, industry supply is steadily recovering, and stainless steel production in August is expected to rise further, gradually releasing incremental supply. Meanwhile, downstream off-season demand is unlikely to see a substantial recovery in the short term, and expectations of supply-demand easing are intensifying, exerting sustained downward pressure on stainless steel prices going forward. In the near term, the market will sustain a divergent trend of weak futures and steady, consolidating spot stainless steel prices. Going forward, close tracking is needed on changes in US Fed policy expectations, the pace of SS futures fluctuations, the strength of downstream off-season demand recovery, the progress of steel mill production resumptions, and raw material cost fluctuations.