Since mid-May, stainless steel futures prices have experienced several rounds of significant ups and downs. On one hand, this was mainly influenced by a tightening trend in NPI supply resulting from the slow approval progress at the mining end as well as dampened NPI production amid the turmoil in New Caledonia. On the other hand, as COMEX copper and LME nickel surged due to capital operations, the domestic non-ferrous sector, including SHFE copper, SHFE nickel, and SHFE silver, also showed a strong rise across the board. Additionally, frequent favorable policies in the real estate sector, a hot trading atmosphere in the stock market, and the rotation of funds in the non-ferrous sector led to a strong rally in stainless steel prices despite its initially weak fundamentals. The SS09 contract closed at 14,115 yuan/mt on May 16, rising to a nearly six-month high of 14,955 yuan/mt on May 30, with a maximum increase of nearly 6%. However, as funds exited the market, stainless steel futures prices faced a continuous downward trend, with the closing price in the early trading session on June 5 at 14,330 yuan/mt, a 4.18% drop from the peak on May 30.
The stainless steel futures market continued to experience wide fluctuations, but the spot market held relatively stable. On June 5, the average price of #304 CRC in Wuxi, according to SMM, was 14,250 yuan/mt, an increase of less than 100 yuan/mt compared to last month's average price, and only a 50 yuan/mt drop from the highest average price. The spot market was cautious regardless of price increases or decreases, and June consumption showed no improvement. The previous bearish sentiment has returned after the stainless steel futures prices fell. Has the current downward trend in stainless steel prices come to an end?
According to SMM, the sluggish transactions in the stainless steel spot market provided no momentum for price hikes. Stainless steel mills raised guidance prices, which increased the cost for traders and reduced the availability of low-priced resources. From the perspective of raw material costs, as the current approval volume of Indonesian nickel ore is limited, supply tightness in the Indonesian market has not been fully alleviated, elevating the demand for Philippine ores, thus pushing Philippine ore prices up. As a result, the nickel ore premium is unlikely to fall in the short term. In terms of NPI, domestic smelters still operated at a loss, and the center of NPI prices further rose amid limited increase in Indonesian NPI supply in May. Additionally, since chrome ore and coke prices increased, steel mills kept the bidding price for high-carbon ferrochrome flat supported by costs. With the tight spot supply at the end of May, high-carbon ferrochrome prices stayed high. The high costs in June mainly supported current stainless steel prices. However, as of June 5, stainless steel warrants exceeded 180,000 mt, with nearly 20,000 mt of warrants expiring in the past two months. The social inventory of 300-series stainless steel increased by about 5.77% MoM. According to an SMM survey, crude steel scheduled production in June is expected to remain high, with most steel mills showing a low willingness to cut production to maintain market share in a bearish industry. Additionally, there is potential for production resumption and new capacity in June and July, and the reduction in Indonesian CRC production will increase HRC output. Meanwhile, with high warrant and inventory pressure, the expectation of a supply surplus in June is further intensified. In summary, although stainless steel prices still face pressure in June, the downside room is limited. Steel mills may hold their offers firm before the Dragon Boat Festival, but there is a greater possibility of further declines in stainless steel prices after the holiday.
