The increase in spot stainless steel prices lags behind that of futures, and it will still take some time for the market supply and demand to recover [SMM Stainless Steel Daily Review]

SMM July 4, the most-traded SS futures contract moved downwards after a higher opening today, with intraday highs approaching the 12,800 yuan/mt threshold. Spot market side, spot prices remained generally stable this week, with narrower fluctuations compared to the futures market. However, market sentiment was visibly influenced by futures movements, with trading activity fluctuating alongside price changes. Early in the week, stainless steel prices faced resistance from the earlier steel mill production cuts news as futures declined, leading to a slight correction and significantly weaker transactions. However, inquiries and deals regained momentum later, driven by futures performance. With recovering consumption and reduced supply pressure from mill output cuts, social inventory of stainless steel further decreased this week, down 1.42% WoW to 978,000 mt.

Futures side, the most-traded SS2508 contract moved downwards after a higher opening. At 10:30 am, SS2508 traded at 12,750 yuan/mt, up 75 yuan/mt from the previous session. In Wuxi, spot premiums/discounts for 304/2B ranged between 75-220 yuan/mt. In spot markets, cold-rolled 201/2B coils in Wuxi and Foshan both quoted at 7,600 yuan/mt; cold-rolled edge-trimmed 304/2B coils averaged 12,725 yuan/mt in both cities; cold-rolled 316L/2B coils in Wuxi and Foshan traded at 23,800 yuan/mt; hot-rolled 316L/NO.1 coils quoted at 23,100 yuan/mt in both locations; cold-rolled 430/2B coils in Wuxi and Foshan both stood at 7,200 yuan/mt.

Currently, despite declining social inventory, recovering market confidence, and improved transaction weakness, stainless steel remains in the traditional consumption off-season without significant end-use demand recovery. Trading still faces substantial influence from futures and news flow, with low market acceptance for high-priced material keeping spot prices at relatively low levels. Although social inventory pulled back slightly over the past two weeks, overall levels remain elevated, with steel mills' in-plant inventories and forward warehouses still facing considerable destocking pressure, slowing the supply-demand relationship recovery. Additionally, under current expectations for production cuts at stainless steel mills, demand for high-grade NPI has declined, keeping nickel pig iron prices at low levels and weakening cost support for stainless steel.