SHANGHAI, May 6 (SMM) – Spot prices of stainless steel are expected to trend higher in the near term, bolstered by a significant rally in futures prices, higher costs of raw materials and decreasing inventories of stainless steel. 

SMM assessed prices of 304/2B cut-edge stainless steel coil in Wuxi at 13,300-13,400 yuan/mt as of May 6, up 50 yuan/mt from end-April. Traders reported active downstream enquiries, likely due to restocking need after the Labour Day holiday. 

The most-traded July stainless steel contract on the Shanghai Futures Exchange climbed more than 3% on Wednesday May 6, ending at 13,215 yuan/mt following an intraday high of 13,245 yuan/mt.

Scheduled production at Chinese stainless steel plants is estimated to expand slightly from a month ago in May. This will support demand and prices of nickel ore and nickel pig iron (NPI) even on the prospects that seaborne nickel ore delivery will normalise and ease any supply shortage in May. 

SMM data showed that domestic social inventories of stainless steel decreased by nearly 200,000 mt in April to about 930,000 mt, on the backdrop of demand pickup. 

Meanwhile, the market saw a shortage of some specifications after reduced production in a falling market in March and April. This also accounted for the recent price rally of stainless steel. 

The 304 cold-rolled coil for June delivery is quoted at 13,100-13,200 yuan/mt by stainless steel mills, 200 yuan/mt higher than the average price on April 20.