[SMM Analysis] Accelerated Warrant Drawdown Combined with Low-Price Restocking Demand Leads Stainless Steel Inventory to Stop Rising and Pull Back

SMM, September 3: This week, stainless steel social inventory ended its prior buildup trend, with overall levels stopping their rise and pulling back as inventory pressure eased marginally. Total inventory across the two core markets of Wuxi and Foshan edged down, falling from 927,300 mt on August 27, 2026, to 925,800 mt on September 3, down 0.16% WoW. The inventory midpoint shifted slightly lower, and pressure from accumulated spot supply was mildly released.

This week, the stainless steel market's peak-season recovery remained slow, with no clear sign yet of concentrated demand recovery from the traditional September-October peak season, and overall end-user demand remained weak. During the week, SS futures continued to slide, with prices briefly touching a low of 13,695 yuan/mt. The persistent weakness in futures accelerated the destocking of futures warrants, making it the core driver behind this week's halt in social inventory gains and subsequent pullback. In the spot market, as futures kept hitting bottom, steel mills' resolve to hold prices firm gradually weakened, and spot prices pulled back accordingly. The increased availability of low-priced spot cargo effectively activated end-user just-in-time procurement sentiment, releasing some low-price restocking demand and driving a phased recovery in spot transactions, with marginal improvement in destocking efficiency. Meanwhile, traders showed greater willingness to sell, accelerating the turnover of circulating supply and further aiding inventory destocking.

Overall, the deep bottoming of futures drove a sharp decline in warrant inventory, low spot prices stimulated just-in-time restocking, and faster market circulation turnover were the core factors behind this week's halt in stainless steel inventory gains and subsequent pullback. At this stage, peak-season demand for stainless steel has yet to fully reverse its weak pattern, with end-user stockpiling momentum still insufficient and demand-side recovery remaining mild. However, low futures levels combined with spot price pullbacks continued to activate just-in-time demand, effectively offsetting prior inventory buildup pressure. In the short term, with low-price just-in-time demand providing support and warrant destocking continuing, the probability of significant inventory buildup remains low, and inventory is likely to maintain a pattern of mild fluctuations and moderate destocking. Going forward, close attention should be paid to the pace of SS futures fluctuations, the strength of end-user peak-season just-in-time demand recovery, the sustainability of low-priced spot transactions, and changes in inventory turnover.