SS futures stopped falling and rebounded, with supply and demand bottlenecks constraining the rally [SMM Stainless Steel Futures Weekly Review]

According to SMM data, the most-traded SS contract fell lower this week. As of 10:30 on June 27, the SS2508 contract was quoted at 12,490 yuan/mt, down 50 yuan/mt WoW.

From a macro perspective, the US Fed maintained the benchmark interest rate range of 4.25%-4.5% unchanged at its June meeting, pausing interest rate hikes for the fourth consecutive time. The dot plot indicated only two interest rate cuts expected in 2025, which was more hawkish than previous market expectations. Powell emphasized that "inflation stickiness is higher than expected" and pointed out that high tariffs may exacerbate US inflationary pressures, further weakening expectations of rapid interest rate cuts. The US dollar index recently fell below 97, hitting a new low since March 2022, and expectations for RMB appreciation have strengthened, with the currency expected to break below 7 within the year, providing direct support for metal prices denominated in US dollars. The US launched air strikes on Iranian nuclear facilities, and Iran threatened to block the Strait of Hormuz, causing Brent crude oil prices to briefly exceed $90/barrel, driving up inflation expectations and exacerbating market risk-aversion sentiment.

From a fundamental analysis, stainless steel market prices have fallen below the five-year low. However, news of significant production cuts from a large domestic stainless steel mill subsequently emerged, boosting market confidence and leading to a stop in falling prices and a rebound. The willingness to purchase among downstream end-users gradually recovered, with transaction volumes picking up, and social inventory of stainless steel fell below 1 million mt. On the cost side, the steel tender prices for high-carbon ferrochrome in July remained stable, but prices for high-grade NPI and stainless steel scrap showed a weakening trend. Against the backdrop of the current off-season in the market, the supply-demand imbalance remained significant.

Overall, the rebound in stainless steel futures this week was mainly driven by macro factors, including a broad-based rally in non-ferrous metals and news of production cuts from stainless steel mills. However, there has been no fundamental reversal in its own supply-demand structure, and the momentum for further gains remains insufficient. Close attention should be paid to the implementation of production cuts by stainless steel mills in the later period.