The stainless steel futures contract showed relatively strong performance last week. As of the closing price on February 29, it reached 14,145 yuan/mt, up 275 yuan/mt from February 22. From a macro perspective, Fed funds futures raised expectations for the Fed to begin cutting rates in June, betting on a 64.4% probability, up from a 57.0% likelihood just before the PCE data was released. Futures traders raised bets to 85.6 basis points of cuts by December, up from 77.9 bps before the data's release. Due to slow process in Indonesia RKAB approval for nickel mining and concerns about the supply of NPI raw materials, the price of high-grade NPI rose, causing stainless steel production costs to increase accordingly.
SMM estimatesshow that the current approved nickel mining quotas meet 60% of the demand. Future approvals are expected to increase, but for now, the market sentiment toward the nickel industry chain is mainly optimistic. Both longs and shorts raised their positions. From a fundamental perspective, the spot market initially saw active speculative trading due to high guidance prices from major steel mills. However, actual downstream demand was relatively flexible, with limited willingness to buy. Because of the price limits set by steel mills, selling has become difficult. Agents sold cargoes at 100-200 yuan/mt lower than steel mills’ guidance prices. Poor demand resulted in the accumulation of inventory. Particularly in Foshan, there's a significant buildup of inventory. 2403 futures contract warrants were popular than spot cargoes. With bearish news domestically and abroad, SMM anticipates a decline in stainless steel futures and spot prices this week.
Please do not hesitate to contact Jean at jeantang@smm.cn or 86-19946295759 if you have any question or inquiry.
