[SMM Stainless Steel Daily Review] SS resilience stands out against nonferrous metals pullback, stainless steel spot prices follow gains with downstream trading cautious

According to SMM on November 6, SS futures consolidated on a strong note today. Although nonferrous metals futures halted their rise and fell sharply today, SHFE nickel and SS did not follow the decline significantly, firmly holding yesterday's gains. As of the close, the most-traded SS contract settled at 14,135 yuan/mt. In the spot market, driven by the continued rise in SS futures, stainless steel spot quotes moved higher in tandem. However, after the rapid price increase, cautious wait-and-see sentiment among downstream end-users continued to build, with market inquiries and transaction activity pulling back somewhat, further intensifying the tug-of-war between longs and shorts.

SS futures most-traded contract. At 10:15 a.m., SS2612 was quoted at 14,180 yuan/mt, up 135 yuan/mt from the previous trading day. Spot premiums for 304/2B in Wuxi were in the 190-590 yuan/mt range. In the spot market, the average price of Wuxi cold-rolled 201/2B coil was flat; for cold-rolled 304/2B coil with mill edge, the average price in Wuxi rose 100 yuan/mt, and in Foshan rose 75 yuan/mt; the price of cold-rolled 316L/2B coil in Wuxi rose 25 yuan/mt; for hot-rolled 316L/NO.1 coil, Wuxi quotes rose 50 yuan/mt; cold-rolled 430/2B coil in both Wuxi and Foshan was flat.

This week, the stainless steel market showed an independent strengthening trend driven by capital flows. SS futures rose against the backdrop of overall weakness in the nonferrous metals sector, reclaiming the 14,100 yuan/mt level during the week. At the start of the week, SHFE nickel and nonferrous metals were broadly under pressure, but SS futures remained relatively independent and persistently strong, mainly supported by the continued decline in warrant inventory, the earlier decline in social inventory, and the entry of institutional funds. Additionally, SS futures' own market size is relatively small, making the capital-driven effect particularly pronounced. On Wednesday afternoon, the results of the US midterm elections were largely settled, with Democrats gradually locking in majority seats in both the House and Senate. Macro uncertainty phased out, futures market sentiment flipped, nonferrous metals strengthened across the board, and SS futures pushed higher again in tandem. In the spot market, the successive upward moves in SS futures drove spot prices higher. Under the "rush to buy amid continuous price rise and hold back amid price downturn" mentality, inquiries and transactions recovered somewhat in recent days. Although downstream end-user clients remained cautious and showed insufficient acceptance of high prices, traders had room to offer concessions. Combined with speculative demand, inquiry and transaction activity among futures and spot institutions and traders warmed up. On the inventory side, social inventory continued to destock slightly during the week, warrant inventory extended its decline, and visible inventory levels remained generally healthy, providing some support to futures. On the cost side, nickel pig iron prices halted losses and steadied, while stainless steel scrap followed the rise in finished steel, narrowing its economic advantage. Although smelting costs rose somewhat, the increase lagged that of finished steel, further expanding steel mill profits. The recovery in profits may incentivize steel mills to raise production schedules, creating marginal upward pressure on the supply side. Overall, the stainless steel market this week showed a game pattern of macro implementation, capital inflows, independent strength, inventory destocking, and profit expansion. In the short term, phased capital flows drove prices to halt losses and rise, but downstream end-user bearish sentiment has not yet dissipated, and the demand side has not yet formed substantial follow-through. Steel mill profit recovery boosted production, and the year-end demand off-season makes a fundamental recovery difficult. Before year-end, there are still expectations for US Fed interest rate hikes, and macro disturbances have not yet been cleared. Overall, this round of gains was driven more by the resonance of capital flows and low inventory, with limited fundamental support. The upward momentum lacks sustainability, and the market may face a slowdown in gains and consolidation at highs. Going forward, focus on the pace of warrant and social inventory destocking, steel mill production schedule adjustments, end-user purchasing strength, and US Fed interest rate decisions.