Favourable macro front boosts stainless steel futures prices to surge, while insufficient demand makes spot prices struggle to rise [SMM Analysis]

According to SMM data, the most-traded SS contract surged and strengthened this week. As of 10:30 a.m. on May 16, the SS2507 contract was quoted at 12,995 yuan/mt, up 285 yuan/mt WoW.

From a macro perspective, on May 12, significant breakthroughs were achieved in the economic and trade talks between China and the US held in Geneva: both sides reached an agreement to substantially reduce the originally planned 125% "reciprocal tariff" to 10% and suspend the imposition of a 24% tariff for 90 days. This move significantly alleviated the negative impact of trade frictions on stainless steel exports and effectively boosted market confidence. Meanwhile, the US CPI data released also caused a stir in the market. The data showed that the US CPI YoY growth rate was far below market expectations, hitting a new low since 2021. This outcome strengthened expectations for US Fed interest rate cuts, injecting a shot in the arm for the commodity market. Amidst the combined impact of these two positive factors, stainless steel futures prices rebounded rapidly in the short term, and market sentiment significantly warmed up.

At the fundamental level, driven by strong favourable macro factors, the stainless steel spot market saw a significant price strengthening this week. The cautious wait-and-see sentiment that had pervaded the market earlier was effectively alleviated, and industry confidence gradually recovered, leading to a noticeable rebound in trading activity within the week. Meanwhile, stainless steel social inventory also showed a downward trend. However, as the impact of the macro-positive factors gradually faded by Friday and the phased procurement demand was met, market transactions weakened again, and prices showed signs of loosening.

Overall, despite the macro-policy tailwinds driving increased trading activity and price hikes in the stainless steel market this week, there has been no substantive turnaround in the industry's fundamentals. On the supply side, stainless steel enterprises maintained a high-production trend, with market supply remaining loose. On the cost side, prices of high-grade NPI and high-carbon ferrochrome continued to decline, weakening cost support. On the demand side, as the traditional peak consumption season draws to a close, downstream phased demand, after being concentratedly released, lacks subsequent growth momentum, and demand sustainability faces challenges. Coupled with the gradual fading of the macro-positive effects, constrained by multiple factors, stainless steel prices lack strong support for upward movement, with upward momentum significantly insufficient in the short term.