[SMM Stainless Steel Daily Review] Indonesia's Nickel Ore Quota News Impacts Futures, Stainless Steel Futures and Spot Prices Pull Back in Tandem

According to an SMM report on Aug 6, SS futures trended downward in search of a bottom, with SHFE nickel and SS both pulled lower by news of Indonesia’s RKAB nickel ore supplement quotas. As of the midday close, the most-traded SS contract settled at 14,380 yuan/mt. In the spot market, the sliding SS futures further fueled cautious wait-and-see sentiment. While traders broadly lowered their quotes in line with the futures, inquiry activity stayed thin and deals continued to weaken.

SS most-traded futures contract: At 10:15 a.m., SS2609 reported 14,465 yuan/mt, down 15 yuan/mt from the previous trading day. Spot premiums for 304/2B in Wuxi stood in the 405-855 yuan/mt range. In the spot market, the average price for Wuxi cold-rolled 201/2B coil remained steady. For cold-rolled raw-edge 304/2B coil, the Wuxi average fell 75 yuan/mt, and the Foshan average dropped 50 yuan/mt. Wuxi cold-rolled 316L/2B coil prices were flat, and Wuxi hot-rolled 316L/NO.1 coil quotes were unchanged. Cold-rolled 430/2B coil prices in both Wuxi and Foshan held steady.

Macro sentiment turned bearish last week to steer metal prices, and stainless steel futures consolidated on a subdued note under overall pressure. The US Fed left rates unchanged as expected at its meeting last week but struck a broadly hawkish tone, broadly weighing on commodity valuations and dragging the nonferrous metals complex lower. Spillover macro headwinds pulled SS futures lower in subdued consolidation as well, with the price center edging down and the overall market mood turning cautious. On spot and inventory, retreating futures and weak off-season demand kept downstream purchases cautious, yet mills holding prices firm, cost support and manageable inventory cushioned spot levels, creating a split where futures were soft while spot held steady. The market is in a traditional consumption off-season, where terminal end-user demand is already relatively thin. Continuous SS declines through the week further eroded market confidence, aggravating wait-and-see sentiment among downstream end-users and steadily weakening purchase appetite, leaving overall spot deals in the doldrums. Spot prices, however, did not see a sharp drop alongside futures. First, major stainless steel mills maintained a firm stance on prices, anchoring the market quote benchmark at the mill-gate level. Second, spot prices had held fairly steady earlier, and social inventory buildups were modest, staying within a reasonable range. No significant overstock burden effectively eased downside risk on spot. Third, mills launched concentrated NPI purchases at month-end, with marginal raw-material demand recovery pushing up nickel pig iron prices. Cost side, this has created firm support for stainless steel spot. Combined, these factors kept spot quotes broadly steady in the short term. On cost and profit, marginal raw-material price increases last week coupled with steady spot prices narrowed mill smelting margins, slightly compressing industry profit room. 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.