[SMM Stainless Steel Daily Review] Stainless steel futures drive spot price recovery, September peak season demand weak, insufficient upward momentum

According to SMM on September 7, SS futures ended their earlier downward trend of hitting bottom and began a strengthening rebound. By the close, the most-traded SS contract settled at 13,885 yuan/mt. In the spot market, although the traditional "September-October peak season" demand recovery fell short of expectations, driven by the SS futures' stabilization and strengthening, low-priced discounted supply continued to shrink, and spot quotes recovered somewhat. However, the market is currently supported only by just-in-time procurement, and the momentum for further price increases remains relatively weak.

SS futures most-traded contract. At 10:15 a.m., SS2610 was quoted at 13,895 yuan/mt, up 25 yuan/mt from the previous trading day. Spot premiums for 304/2B in Wuxi were in the range of 475-775 yuan/mt. In the spot market, the average price of Wuxi cold-rolled 201/2B coil was flat; for cold-rolled 304/2B coil with raw edges, the average price in Wuxi rose 25 yuan/mt, and the average price in Foshan rose 25 yuan/mt; the price of cold-rolled 316L/2B coil in Wuxi was flat; for hot-rolled 316L/NO.1 coil, Wuxi quotes were flat; cold-rolled 430/2B coil in both Wuxi and Foshan was flat.

This week, stainless steel futures overall extended their weak trend and broke down further. The traditional "September peak season" consumption period officially began, but expectations for demand recovery fell through, and market sentiment turned pessimistic and bearish. SS futures came under pressure and weakened, with the weekly low briefly dipping below 13,700 yuan/mt. The market's valuation center continued to pull back, and bearish sentiment dominated. The spot market weakened in tandem with futures, with no pre-peak-season rally emerging, further intensifying the supply-demand imbalance. The market has now entered the traditional peak-season consumption window, but downstream end-users have not shown concentrated stockpiling activity. Just-in-time procurement remained persistently weak, and overall market trading was sluggish. Inventory showed structural divergence. This week, futures remained persistently low, and warrant inventory steadily pulled back, driving a slight decline in stainless steel social inventory. However, fundamental pressure has not materially eased. Steel mill production schedule cuts were limited, overall capacity remained at high levels, and combined with persistently weak end-user just-in-time procurement, destocking efficiency was low. Overall industry inventory pressure remained high, and the supply-demand surplus persisted. Cost and profit pressures were fully evident, with steel mills falling into a loss-making pattern. This week, stainless steel product and raw material prices pulled back in tandem, but product prices fell more than raw material prices due to drag from futures, officially pushing the industry into losses and squeezing steel mill smelting margins. Under profit pressure, steel mills' desire to bargain down prices for nickel-bearing raw materials continued to strengthen, in turn suppressing raw material price trends and forming a negative cycle of "falling product prices, losses, and raw material price suppression." Overall, this week the stainless steel market exhibited a weak game pattern of dashed peak-season expectations, sluggish end-user just-in-time procurement, futures breaking down, spot prices following declines, structural inventory divergence, and steel mill losses. In the short term, the failure of peak-season demand to recover, spreading market pessimism, high production schedules at steel mills, and bear dominance in futures constitute the core bearish factors, keeping the market weak. Going forward, focus on the pace of SS futures stopping falling and repairing, the realization of downstream peak-season rigid demand and stockpiling progress, adjustments to steel mill production schedules, changes in raw material and finished product price spreads, and the pace of inventory destocking.