SHANGHAI, Dec 27 (SMM) - After experiencing a wave of drastic declines, the most-traded SS contract stopped ended its six-day losing streak yesterday, and once rose nearly 1.7% before closing up 1.44% at 16,540 yuan/mt as of yesterday noon.

In terms of inventory: As of December 15, the stainless steel inventories in Wuxi and Foshan were 663,000 mt, which was little changed from November. In late December, supply and demand may weaken further. On the supply side, steel mills may continue to control the pace of cargo arrivals in the spot market. On the demand side, improved spot trades in the first half of December might have overdrawn orders in the second half of the month, hence trades may become muted and social inventories may accumulate

Macro: Recently, the US dollar index fluctuated within a narrow range.

According to SMM survey, the stainless steel output was 2.88 million mt in November, up 6.67% MoM and 9.42% YoY. The output of 200-series stainless steel fell 4.08% MoM to 987,000 mt, 300-series dropped 7.52% MoM to 1.45 million mt, and 400-series increased 3.55% MoM to 440,500 mt.

In November, the output of domestic stainless steel mills increased to a certain extent compared with October. Among them, the 200 and 300-series stainless steel declined significantly while the 400-series still increased slightly. The transactions of 200-series stainless steel were in November. At the same time, the in-plant inventory of steel mills and the social inventory in the spot market accumulated. Therefore, many steel mills carried out maintenance and reduced the production in advance. Although the production capacity of newly commissioned steel mills increased, many steel mills reduced the production in the second half of November due to the high costs of various raw materials and the weak downstream demand. Therefore, the total output of the 300-series stainless steel still decreased month-on-month.

In December, the total output of stainless steel mills across the country may increase slightly from the previous month. Due to the recovering profits and the good spot transactions, the production of 300-series stainless steel may resume. In addition, the pandemic prevention and control policies are gradually eased in various places. As such, terminal enterprises in some areas may purchase in advance and the construction of some large-sized infrastructure projects gradually starts. The transmission of demand to terminals is relatively smooth. On the whole, the supply of stainless steel may increase in December. Amid the improving demand and the decline in costs, SMM believes that the prices of stainless steel will stabilise in December.

In terms of cost: The price of NPI was flat yesterday. Steel mills are pessimistic about future consumption, and the demand for NPI is weak. The supply of NPI plants is stable. It is expected that the short-term NPI price will maintain a weak and stable trend amid stable nickel ore prices. 

The price of ferrochrome held firm as tight supply encouraged sellers to hold back cargoes at low prices. On the whole, with relatively strong cost support, it is expected that SS contract will have limited room to decline in the short term.