[SMM Stainless Steel Daily Review] SS Futures Strengthened and Lifted Spot Prices, Producers Held Prices Firm to Support Short-Term Quotations

SMM, June 2: SS futures rose sharply. Driven by the overall strengthening of non-ferrous metal futures, SS also rose. As of the close, the most-traded SS contract was quoted at 15,065 yuan/mt. Spot market side, driven by the sharp rise in SS futures, stainless steel spot prices were raised in tandem. Fueled by the sentiment to rush to buy amid continuous price rise and hold back amid price downturn, trading activity picked up. Although the market was currently in the off-season with slightly insufficient confidence, stainless steel producers still had the willingness to hold prices firm, and social inventory had not yet shown significant accumulation. Despite slightly sluggish downstream demand, prices were expected to remain firm in the short term.

The most-traded SS futures contract strengthened and probed higher. At 10:15 AM, SS2607 was quoted at 14,149 yuan/mt, up 110 yuan/mt from the previous trading day. Spot premiums for 304/2B in the Wuxi area were in the range of 275-725 yuan/mt. In the spot market, the average price of cold-rolled 201/2B coils in Wuxi remained flat; for cold-rolled untrimmed 304/2B coils, the average price in Wuxi rose by 100 yuan/mt and in Foshan by 25 yuan/mt; cold-rolled 316L/2B coil prices in Wuxi rose by 150 yuan/mt; hot-rolled 316L/NO.1 coils in Wuxi were quoted up 50 yuan/mt; cold-rolled 430/2B coils in both Wuxi and Foshan remained stable.

This week, the stainless steel market saw futures edge up slightly while spot cargo stabilized sideways, with weak futures-spot linkage. The market officially entered the traditional consumption off-season, and the tug-of-war between longs and shorts on fundamentals intensified. Traders had weak confidence in the market outlook with strong wait-and-see sentiment, but the slight recovery in futures stabilized market activity. Combined with steel mill agents holding prices firm for shipments and sustained rigid downstream demand providing a floor, social inventory continued slight destocking. The overall picture showed slight recovery in futures sentiment, rigid demand supporting spot cargo, weakening off-season demand, and supply staying high. Futures side, SS futures edged up this week to test a rebound, but upside momentum was insufficient, and futures consistently failed to break through 15,000 yuan/mt. This rebound lacked substantive fundamental support and was driven solely by recovery in market sentiment, leaving limited upside room and making it difficult to drive spot prices up in tandem, with the overall trend moving sideways. Spot cargo and inventory side, the slight recovery in futures supported stable spot quotes, and rigid demand transactions remained steady. Currently, the off-season effect was emerging, with downstream purchase intensity gradually weakening and steel mills receiving fewer forward orders. However, the recovery in futures improved market sentiment, and combined with active shipments by steel mill agents, social inventory continued slight destocking to 936,300 mt this week, with low inventory levels providing some support for spot cargo. Cost and supply side, raw material prices were generally stable, with the rally in high-grade NPI slowing down, and stainless steel scrap and high-carbon ferrochrome prices holding steady. Current steel mill profitability was moderate, with spot raw material calculated profit margins at 2%-3% and inventory raw material calculated profit margins at 3.5%-5%. The considerable profits supported steel mills in maintaining high production schedules. Affected by insufficient orders during the off-season, the industry sought to stabilize prices. Most steel mills no longer increased production, and some enterprises planned maintenance and production cuts, but the overall high supply pattern of the industry did not see significant changes. Overall, the weakening trend of stainless steel off-season demand was clear, forward orders were sluggish, and demand-side support continued to decline. In the short term, futures recovery, rigid demand, and low inventory levels could support stainless steel spot prices against decline, but pressure from high production schedules driven by high steel mill profits persisted. Going forward, off-season demand will pull back further, the supply-demand mismatch will gradually intensify, and the risk of price pullback will rise. Key factors to monitor going forward include the sustainability of futures rally, changes in downstream rigid demand, the implementation of steel mill maintenance plans, and raw material price fluctuations.