[SMM Stainless Steel Daily Review] Macro Disturbances Dragged Down SS Futures, Low Inventory Pressure and Rigid Demand Supported Stainless Steel Spot Prices

SMM May 15 reported that SS futures remained in the doldrums. Non-ferrous metal futures continued yesterday's decline, with SS also fluctuating downward in tandem. As of the midday close, the most-traded SS contract was quoted at 14,825 yuan/mt. Spot market side, dragged down by the persistently weak SS futures, stainless steel spot prices pulled back in tandem; however, as stainless steel social inventory has been on an overall declining trend recently, traders currently faced relatively small shipment pressure, market confidence remained stable, and price declines were relatively limited.

The most-traded SS futures contract fell and pulled back. At 10:15 AM, SS2605 was quoted at 14,890 yuan/mt, down 60 yuan/mt from the previous trading day. Spot premiums for 304/2B in the Wuxi area were in the range of 380-680 yuan/mt. In the spot market, the average price of cold-rolled 201/2B coil in Wuxi remained flat; for cold-rolled untrimmed 304/2B coil, the average price in Wuxi fell 100 yuan/mt, and the average price in Foshan fell 100 yuan/mt; cold-rolled 316L/2B coil in the Wuxi area held steady; hot-rolled 316L/NO.1 coil quotes in Wuxi held steady; cold-rolled 430/2B coil in both Wuxi and Foshan held steady.

The stainless steel market was dragged down by the weak and volatile futures, with notable downward pressure, but overall spot price declines were limited, highlighting the divergence between futures and spot. Downstream end-users, affected by macro uncertainties, maintained a cautious wait-and-see attitude without concentrated restocking behavior, but rigid demand purchases remained solid, providing fundamental support for spot prices. Trader side, attitudes toward purchasing high-priced cargoes were cautious, overall inventory pressure was relatively small, market sentiment was relatively stable, and no obvious price-cutting sell-offs occurred, further reinforcing the resilience of spot prices. Futures side, SS futures overall fluctuated downward with futures clearly under pressure, and macro sentiment disturbances became the core factor dominating the market. In particular on Thursday, affected by news of the Fed Chairman transition, market concerns over uncertainties in the subsequent monetary policy direction intensified, pessimistic sentiment spread, pushing SS futures to probe significantly lower. This round of futures decline was mainly driven by macro sentiment disturbances, while changes in stainless steel's own supply-demand fundamentals were limited. Supply and inventory side, current stainless steel mills maintained strong production willingness, production schedules stayed high, and the industry's ample supply pattern remained unchanged. This week, steel mills' earlier cargo allocation volumes were relatively low, market arrival pressure was limited, coupled with traders' cautious purchasing and low inventory levels, spot selling pressure was weak. Meanwhile, downstream rigid demand cargo pick-up remained stable, and multiple factors drove social inventory to pull back slightly, with inventory currently declining to 947,100 mt. The low inventory state provided relatively strong support for spot prices. Cost side, high-grade NPI had relatively strong fundamentals of its own, with strong market willingness to hold prices firm, and price declines were relatively limited; high-carbon ferrochrome and stainless steel scrap prices declined in tandem, affected by the continued decline in stainless steel finished product prices, and steel mill profits narrowed somewhat. However, steel mills currently still enjoy considerable overall profit margins with strong production motivation, making it difficult to adjust the high production schedule pace in the short term, and they will continue to maintain high-level production. Overall, macro uncertainties remain significant, and monetary policy disturbances brought by the US Fed leadership transition continue to affect futures trends. Although stainless steel social inventory is currently low, traders face relatively small inventory pressure, and spot prices show notable resilience, steel mills enjoy favorable profit margins and production schedules stay high, meaning long-term supply pressure persists across the industry. Meanwhile, the market is gradually approaching the traditional stainless steel consumption off-season, and there is a risk of weakening end-use demand going forward. Based on comprehensive analysis, against the backdrop of ample supply, marginally weakening demand, and frequent macro disturbances, stainless steel prices face the risk of further retreat from highs. Going forward, close attention should be paid to US Fed monetary policy developments, raw material price fluctuations, the sustainability of downstream rigid demand, and adjustments to steel mill production schedules.