The Most-Traded Stainless Steel Futures Contract Falls to Four-Year Low, Expected to Remain at Low Levels [SMM Analysis]

Last week, the most-traded SS contract continued to decline, hitting a four-year low of 12,895 yuan/mt on Wednesday, and then fluctuated downward at low levels. Due to the resilient US labor data, continuous recovery in manufacturing data, and a rebound in inflation, coupled with the cautious stance of US Fed officials, market bets on subsequent interest rate cuts by the Fed have decreased. Two weeks ago, the US dollar hit a nearly two-year high, leading to a collective weakening of commodities. Meanwhile, the strong expectation of the US raising tariffs domestically, combined with the increased proportion of stainless steel in foreign demand this year, has also negatively impacted stainless steel due to weakened foreign trade. The divergence between SHFE nickel and stainless steel prices is attributed to a French miner stating that Indonesia's restrictions on nickel ore will shift production towards the stainless steel industry, thereby reducing local battery and nickel ore supply.

However, the primary reason for the decline in stainless steel prices remains industry-related. On the raw material side, a large stainless steel mill in South China lowered its 304 coil price by 200 yuan/mt, with 304 stainless steel continuing to drop by about 400 yuan/mt over the past two weeks. The weak feedback from steel prices to upstream has led the mill to transact tens of thousands of mt of NPI at a low price of 960 yuan/mtu, causing a significant drop in NPI prices within the week. Regarding other raw materials, the bidding price of high-carbon ferrochrome at the beginning of the week also plummeted by 700 yuan/mt, and the purchase price of stainless steel scrap has also seen a substantial decline, with only manganese-based raw materials fluctuating downward with relatively small declines. The cost support for stainless steel has completely broken down. Fundamentally, stainless steel mill shipments are high, agents face significant pressure to sell, and downstream purchase demand remains weak in the off-season. The recent strong expectation of inventory buildup and the excessive price drop have made downstream procurement increasingly cautious. In the short term, the situation of strong supply and weak demand is difficult to improve, further exacerbated by the expiration of some warehouse warrants in the past two months, leading to a further supply-demand imbalance. Currently, top-tier enterprises are also experiencing losses but still intend to suppress raw material prices. It is difficult for steel prices to rise in the short term, and the most-traded SS contract is expected to continue fluctuating downward at low levels.