Macro Disturbances in Stainless Steel Fade, Supply and Demand Dilemma Exerts Pressure [SMM Analysis]

SMM data shows that the most-traded SS contract weakened this week. As of 10:30 a.m. on May 30, the SS2507 contract was quoted at 12,700 yuan/mt, down 195 yuan/mt WoW.

From a macro perspective, Moody's downgraded the US sovereign credit rating from AAA to AA1, breaking the top rating it had held since 1917. The main reasons were the US's high fiscal deficit and ballooning debt. Meanwhile, Trump's "reciprocal tariff" policy triggered a chain reaction. It is estimated that the implementation of these tariffs will cause the US effective tariff rate to soar, potentially pushing up core PCE inflation by 1.9 percentage points in April. This has disrupted the US Fed's monetary policy rhythm, with interest rate cut expectations being postponed from July to September. It is expected that there will only be 50-75 basis points of interest rate cuts for the entire year. Faced with the dilemma of "rising inflation and unemployment," Powell insisted on policy independence and rejected Trump's demand for interest rate cuts. However, the impact of recent macro news on the stainless steel futures market has weakened, and the market is gradually returning to being dominated by supply and demand fundamentals.

From a fundamental perspective, the stainless steel market is approaching the traditional consumption off-season. Even before the Dragon Boat Festival, the expected procurement and stockpiling market did not materialize, and overall transactions remained sluggish. Despite the current relatively low stainless steel prices, which have led to an inversion between smelting costs and selling prices, and the continuous news of production cuts and maintenance at stainless steel mills, market participants' confidence has generally been undermined under the dual pressures of high inventory backlogs and persistently weak downstream demand, with expectations for the future market trending towards pessimism.