Since May, SS contract has shown an overall upward trend, reaching a new high of 14,955 yuan/mt on May 30, the highest since October 17, 2023, with an increase of 1.99% MoM. Entering June, it continued to weaken, hitting a new low of 13,800 yuan/mt on the night of June 17, the lowest since April 17, 2024. As of the daytime close on June 18, it had fallen 5.28% from the beginning of the month.

Spot Prices

Since May, the average spot price of SMM 304/2B coil-uncut edge (Wuxi) has shown an initial decline followed by an increase, with the average price rising by 0.35% MoM as of May 31. Entering June, prices continued to decline, falling by 2.45% from the beginning of June as of June 18.

Fundamentals

Supply Side: In May, the supply side shifted from tightness to looseness. In early to mid-May, strong stainless steel prices led stainless steel mills to maintain control over delivery schedules and reduce shipments to agents. However, as agents' willingness to take orders and pick up goods further declined, the pressure on inventory at stainless steel mills increased, leading to a large flow of accumulated resources into the market.

Entering June, crude stainless steel production remained high, but a slight reduction compared to May is expected. As stainless steel mills began to release more supply, spot resources accumulated. In addition, the narrowing future-spot price gap caused warrant outflows. Therefore, spot resources are expected to be ample in June. With many warrants maturing, there is a risk of further inventory accumulation in the social stock.

Inventory: In May, the total domestic stainless steel inventory by region showed an overall rising trend. As of May 9, the inventory had increased by 4.85% compared to April, followed by a slow accumulation trend, with an increase of 5.87% MoM as of May 30. The continuous inventory accumulation in May was mainly due to increased production by stainless steel mills, with increased supply in Wuxi and Foshan, and slow social inventory digestion amid weakened downstream demand. Meanwhile, agents and traders had low willingness to pick up goods, but the previous cargo withholding by stainless steel mills led to visible inventory pressure, prompting stainless steel mills to resume normal distribution by late May.

Entering June, inventory continued to rise, with a 1.49% increase compared to May as of June 13. Demand remained at May levels, and crude steel production might slightly decline, leading to a potential slow digestion of social inventory in late June.

Demand Side: May was an off-season for consumption. Although the real estate sector had favorable policies, it takes time to have an effect on end-users. Therefore, consumption demand was weak. The monthly inventory accumulation rate was 1.65%, slower than the previous month.

Entering June, the industry remained in the off-season. Current guidance prices of stainless steel mills and futures prices were mainly supported by cost lines. Tight nickel ore supply amid slow Indonesian nickel ore approval progress, high prices of NPI and ferronickel, and high costs of coking coal, chrome and manganese provided some support for prices, but the prices still have downward room amid poor demand.

SMM Outlook

Overall, the fundamentals showed that crude stainless steel production remained high in May and June, with continued inventory accumulation indicating difficulties in digesting stainless steel. The downstream demand weakened, and supply re-entered an oversupply state. On the cost side, stainless steel cost support still existed, with expectations of tight Indonesian nickel ore supply and high prices of NPI, chrome and manganese. Currently, stainless steel mills suffer losses. With strong supply and weak demand, and limited cost support, SMM expects SS contract to experience weak fluctuations in late June.