Sluggish demand for stainless steel, warning of simultaneous decline in volume and price [SMM Stainless Steel Daily Review]

SMM reported on May 30 that today, the SS futures market continued to exhibit a fluctuating trend. Despite the approaching Dragon Boat Festival holiday, the market did not witness the expected pre-holiday stockpiling activity. As the stainless steel market gradually enters the traditional consumption off-season, overall transactions have become increasingly sluggish. Traders are generally facing challenges in selling their products, with some merchants choosing to offer discounts to boost sales, thereby driving spot prices to remain in the doldrums. Recently, news of production cuts by stainless steel mills has been circulating, but due to the simultaneous weakening of downstream demand, the supply contraction resulting from production cuts is insufficient to offset the impact of declining demand. Against this backdrop, the stainless steel market may face a situation where both volume and prices decline simultaneously.

In the futures market, the most-traded 2507 contract fluctuated. At 10:30 a.m., SS2507 was quoted at 12,700 yuan/mt, down 10 yuan/mt from the previous trading day. In the Wuxi region, the spot premiums/discounts for 304/2B stainless steel ranged from 470 to 670 yuan/mt. In the spot market, the cold-rolled 201/2B coils in Wuxi and Foshan were both quoted at 7,950 yuan/mt; the cold-rolled trimmed 304/2B coils had an average price of 13,100 yuan/mt in Wuxi and the same in Foshan; the cold-rolled 316L/2B coils were priced at 24,050 yuan/mt in Wuxi and the same in Foshan; the hot-rolled 316L/NO.1 coils were quoted at 23,350 yuan/mt in both regions; and the cold-rolled 430/2B coils were both priced at 7,500 yuan/mt in Wuxi and Foshan.

Currently, the stainless steel market has fully entered the traditional consumption off-season, with significantly weak downstream demand and continuously declining market activity. On the supply side, stainless steel producers are still maintaining relatively high production levels, resulting in immense pressure for stainless steel mills to sell their products. The issue of inventory buildup among agent traders has become increasingly prominent, and social inventory has consistently fluctuated at highs. Affected by insufficient downstream end-user orders, some futures-to-spot traders, after completing futures arbitrage, have chosen to sell spot cargoes at low prices to recoup funds, causing a large volume of goods to circulate only within the trading sector and struggle to truly enter the end-use consumption market. Despite the recent rebound in high-grade NPI prices and the fact that stainless steel prices have reached historical lows, with the phenomenon of losses among enterprises providing some support to prices, under the dual pressures of shrinking off-season demand and a high-supply pattern that has not been fundamentally improved, if the sales difficulties persist, stainless steel prices will still face significant downward pressure in the short term.