[SMM Stainless Steel Daily Review] SS futures moved sideways, spot offers remained stable, and cost support emerged amid weak demand.

As reported by SMM on August 20, SS futures consolidated on a strong note. Although boosted by the weakening US dollar, the night session traded firm, but after opening in the morning, it gradually pulled back. Intraday amplitude was limited, and at the close, the most-traded SS contract settled at 14,300 yuan/mt. In the spot market, tracking the sideways movement pace of SS futures, stainless steel spot quotes were largely stable, with transactions remaining sluggish. Although demand weakness persists, current stainless steel mill profits are narrow, and cost-side support for prices has strengthened, also providing bottom support.

The most-traded SS futures contract. At 10:15 a.m., SS2610 was reported at 14,345 yuan/mt, up 85 yuan/mt from the previous trading day. Spot premiums for 304/2B in Wuxi were in the range of 375-525 yuan/mt. In the spot market, the average price of cold-rolled 201/2B coil in Wuxi remained stable; cold-Rolled 304/2B coil (mill edge) saw the average price up 25 yuan/mt in Wuxi and 25 yuan/mt in Foshan; the price of cold-rolled 316L/2B coil in Wuxi was flat; hot-Rolled 316L/NO.1 coil in Wuxi was unchanged; cold-rolled 430/2B coil in both Wuxi and Foshan was unchanged.

This week, stainless steel futures were continuously disturbed by macro sentiment, maintaining a weak pullback trend overall. During the week, repeated news of Indonesia's RKAB nickel ore approval disturbed industry expectations. Coupled with the Fed's hawkish policy stance and unresolved US-Iran geopolitical conflict, macro uncertainty in the market stayed high. A confluence of bearish factors dragged SS futures down continuously during the week, with bears sentiment dominating the market and the center of futures operations steadily moving lower. The spot market showed a pattern of weak futures-spot linkage, weak supply and demand but prominent inventory resilience, with prices declining overall. The market is still in the traditional consumption off-season, with no signs of recovery before the September-October peak season. End-users are cautious in purchasing, and market transactions are mainly based on rigid demand procurement, with no centralized restocking activities. The sustainability of rigid demand is weak, making it difficult to provide upward support for spot prices. From the supply side, stainless steel mills' production schedules in August have increased steadily, and the pace of capacity release has accelerated. Against the backdrop of terminal demand not recovering synchronously, the market's supply-demand pressure has marginally increased. However, during the week, Typhoon "White Dolphin" directly impacted east China, hindering operations at core ports and land logistics. The pace of cargo dispatch and arrival was limited, which temporarily offset the pressure from supply growth. As a result, stainless steel social inventory remained largely stable this week with no obvious inventory buildup, and the reasonable inventory structure provided bottom support for spot prices. On the cost and profit side, finished product prices pulled back along with futures this week, and steel mills' efforts to hold prices firm weakened, dragging spot quotes lower. However, the raw material side showed sufficient resilience, effectively limiting the decline in prices. During the week, NPI prices showed relative resilience, providing strong support for stainless steel production costs, while the weak pullback in finished product prices narrowed the price spread between finished products and raw materials, significantly squeezing steel mills' smelting profits. Overall, the cost side provided rigid support, effectively preventing a deep decline in spot prices. The market exhibited a pattern characterized by "futures falling, spot weakening, cost underpinning, and limited downside." On the whole, the stainless steel market this week experienced a game pattern where macro headwinds dragged down futures, off-season demand was weak, supply growth added pressure, inventory held steady to underpin, and cost resilience resisted declines. In the short term, the market fundamentals are clearly weak, with steel mills gradually increasing production further amplifying future demand pressure, posing a risk of periodic price pullbacks. However, reasonable inventory levels and firm raw material costs form a dual underpinning, restricting downside room. Overall, the market is expected to be in the doldrums and consolidate. Going forward, focus should be on tracking macro sentiment shifts, fluctuations in SS futures, progress in end-user off-season demand recovery, implementation of steel mill production increases, and changes in inventory turnover.