[SMM Stainless Steel Daily Review] SS Futures Fluctuated and Stabilized, Stainless Steel Spot Trading Slowed Down Before the Holiday

SMM February 5th, SS futures showed a pattern of being in the doldrums. Despite the overall decline in SHFE nickel and other non-ferrous metals today, SS futures largely remained stable, with the high point reaching 13,900 yuan/mt. In the spot market, due to the weakening of SS futures and the approaching Chinese New Year holiday, the activity of inquiries and transactions for stainless steel further declined. However, as most traders have entered the holiday preparation phase, they remain optimistic, and quotations are generally stable.

The most-traded SS futures contract was in the doldrums. At 10:30 AM, SS2603 was quoted at 13,760 yuan/mt, down 100 yuan/mt from the previous trading day. In Wuxi, the spot premiums/discounts for 304/2B were in the range of 410-610 yuan/mt. In the spot market, the 201/2B cold-rolled coil in Wuxi was quoted at 8,500 yuan/mt; the 304/2B cold-rolled coil (with edge) had an average price of 14,100 yuan/mt in Wuxi and 14,050 yuan/mt in Foshan; the 316L/2B cold-rolled coil was priced at 26,600 yuan/mt in both Wuxi and Foshan; the 316L/NO.1 hot-rolled coil in Wuxi was quoted at 25,750 yuan/mt; and the 430/2B cold-rolled coil in both Wuxi and Foshan was 7,800 yuan/mt.

As the Chinese New Year holiday approaches and risk aversion sentiment among investors increases, bulls are taking profits, leading to a lack of upward momentum in SS futures, which are in the doldrums. The signs of capital withdrawal are evident, further limiting the upside room. As a result, although stainless steel spot prices remain high, the upward trend is hindered, and market sentiment has shifted from cautious to conservative. The fundamental support in the spot market is weak, and the pre-holiday market is sluggish, with a notable feature of "high prices, low transactions." With the approach of the Chinese New Year, pre-holiday stockpiling by downstream end-users has largely concluded. Given the current high spot prices, there is a strong fear of high prices, and the willingness to purchase remains low, resulting in low actual transactions. Most traders plan to take holidays before the first week of February, further reducing market activity. This week, social inventory of stainless steel slightly rebounded but remains at historically low levels. The main participants in the market are mainly futures and spot institutions, with a low proportion of actual purchases by end-users. A large amount of goods is held in the circulation stage, not truly entering the end-use consumption sector, severely lacking support from end-use demand, and intensifying market competition. On the supply side, the impact of the Chinese New Year holiday has already become apparent, and stainless steel production in February is expected to significantly pull back. However, as downstream end-use industries also enter the holiday, demand will experience a temporary halt. The benefits of reduced supply are completely offset by the contraction in demand, making it difficult to provide effective support for market prices in the short term, with a relatively weak overall impact. Cost side, the overall trend showed a divergence. The rise in high-grade NPI slowed significantly this week, with stainless steel mills showing a weak willingness to purchase high-priced raw materials, leading to relatively light actual transactions; high-carbon ferrochrome, on the other hand, continued its upward trend, but the overall support for stainless steel prices had weakened, with the cost center only shifting slightly upward. Overall, the stainless steel market this week was mainly driven by the capital movements in futures, with the fundamental support from the spot market being relatively weak. With pre-holiday risk aversion, weak end-use demand, and transactions stagnating in the distribution channels, the market lacked core fundamental support, and short-term activity is expected to decline further, putting downward pressure on spot prices.