[SMM Stainless Steel Daily Review] Futures extended the weak trend and broke below support; spot stainless steel prices held steady with sluggish trading.

According to SMM on August 31, SS futures extended their prior weak trend, continuing to move lower and probe lower, and broke below the 13,900 yuan/mt mark. By the close, the most-traded SS contract ended at 13,890 yuan/mt. In the spot market, although guidance prices at stainless steel mills held steady and most traders kept quotes stable, dragged by repeated declines in SS futures, market confidence weakened further, transactions remained sluggish, and there was still no sign of recovery before the peak season.

The most-traded SS futures contract. At 10:15 am, SS2610 traded at 13,865 yuan/mt, down 120 yuan/mt from the previous trading day. Wuxi 304/2B spot premiums were in the 485-885 yuan/mt range. In the spot market, the average price of Wuxi cold-rolled 201/2B coil was flat; for cold-rolled raw-edge 304/2B coil, average prices in Wuxi and Foshan were flat; Wuxi cold-rolled 316L/2B coil prices were flat; Wuxi hot-rolled 316L/NO.1 coil quotes were flat; and cold-rolled 430/2B coil prices in Wuxi and Foshan were flat.

Stainless steel futures showed an overall weak breakdown this week, with volatility intensifying and the price center continuing to move lower. Futures were broadly weak during the week. Midweek, affected by a sudden safety accident at a nickel-iron smelting line in east China, market supply concerns heated up, briefly driving SS futures to shoot up and rebound. The positive catalyst lacked persistence, however, and the market's core bearish logic remained unchanged; futures subsequently weakened again and broke below the key 14,000 yuan/mt mark, with bearish sentiment continuing to be released overall and market trading sentiment remaining weak. The spot market weakened in tandem with futures, pre-peak-season demand remained absent, and loose supply-demand conditions became more evident. The market has entered late August, approaching the traditional “September-October peak season,” but end-user advance stockpiling activity has not started as expected, downstream rigid demand remained weak, market transactions remained sluggish, and overall market confidence was insufficient. Supply-demand pressure continued to build. Weak end-user purchasing combined with heavy overall shipment pressure meant steel mills focused on active selling and lowering their own inventories, which drove incremental supply into the distribution chain. This week, stainless steel social inventory rose further, extending the inventory buildup. Meanwhile, mainstream steel mills offered price compensation to agents for earlier allocated shipments, noticeably loosening their price-holding strategy and further weakening spot price support; coupled with the continued breakdown in futures, the spot price center continued to pull back accordingly. Cost and profit sides formed bottom support, effectively limiting room for spot prices to fall sharply. This week, stainless steel product prices and nickel-based raw material prices pulled back in tandem, but steel product prices fell more sharply under the drag of futures, the price spread between steel products and raw materials continued to narrow, steel mill smelting margins were further squeezed, and the industry as a whole was already near loss-making territory. Cost-side rigid support became increasingly evident, effectively offsetting some bearish futures factors and supply-demand pressure, keeping spot price declines relatively contained and leaving the market weak but unlikely to slump. Overall, this week the stainless steel market exhibited a pattern of competing forces in which futures retreated after a rapid rise and broke support, pre-peak-season demand failed to materialize, steel mills’ price support loosened, inventory continued to build, and costs near loss-making levels provided floor support. In the short term, weak end-use demand, market inventory buildup, and bear-dominated futures remain the core bearish factors, making the weak market pattern difficult to reverse; however, the risk of losses continues to constrain downside room, and the market is likely to continue consolidating on a subdued note. Going forward, key items to track include the sustainability of SS futures, the pace at which downstream peak-season stockpiling materializes, changes in steel mill shipments and price-support policies, changes in raw material-to-finished product price spreads, and the pace of social inventory buildup.