Stainless steel futures rebounded after two consecutive weeks of decline, but the outlook remains pessimistic.

Since August 5, the SS contract has been continuously declining. As of the close on August 16, the price dropped to 13,655 yuan/mt, down about 165 yuan/mt WoW. From a macro perspective, recent US employment data performed well, stabilizing the dollar after four consecutive days of decline, with an overnight increase of 0.45%. Additionally, US retail sales in July exceeded expectations, indicating stable demand, while the number of jobless claims in the past week was also lower than expected. These factors may prompt financial markets to adjust their expectations for a 50 basis point rate cut next month. Although the probability of a US Fed rate cut has increased, market attention to the US rate cut has decreased. The fundamentals of the non-ferrous metals sector have generally improved, with metal prices rebounding across both overseas and domestic futures markets. However, further increases lack bullish logic for the time being. SHFE nickel remains in a volatile state and has not resonated with stainless steel for a synchronized rise.

From the perspective of the stainless steel market fundamentals, on August 16, SMM Wuxi region's 304 uncut edge cold-rolled coil was quoted at 13,650-14,100 yuan/mt, down 100-150 yuan/mt WoW. Spot prices continued to decline, but inquiries for 304 cold-rolled coils were active, and traders were also bottom-fishing, indicating that there is still some demand. Currently, the futures and spot prices are far below the cost line. In terms of social inventory, monthly inventory decreased by 1.05% MoM, and 304 cold-rolled weekly inventory decreased by 1.43% WoW. Overall, the fundamentals of the stainless steel market are still acceptable. However, recent stainless steel prices have been more influenced by the ferrous metals series logic. The decline in the futures market led steel mills to remove warrants to push up prices, but low-priced warrants suppressed spot market transaction prices, forming a negative feedback loop. Although the market slightly recovered on Thursday and Friday, it still showed a discount to the spot market. In the short term, stainless steel futures are expected to remain weak. With NPI prices softening, costs are difficult to support, and stainless steel mills may need to cut production to improve the supply-demand structure.

In summary, the current fundamentals of stainless steel are stable, but macro sentiment is weak, and there is a lack of upward momentum. Although NPI prices have softened, ore prices have risen, and the return volume in August has decreased, cost support remains. It is expected that the SS contract will slowly recover to parity with the spot price and then fluctuate.