SS Futures Pull Back After Testing Highs, Stainless Steel Supply Increase Intensifies Downstream Inventory Pressure [SMM Stainless Steel Futures Weekly Review]

SMM data showed the most-traded SS futures contract first rose then fell this week. As of 10:30 on September 5, the SS2510 contract was quoted at 12,740 yuan/mt, down 50 yuan/mt WoW.

From a macro perspective, US August ADP employment increased by 54,000, below expectations, while initial jobless claims rose to 237,000, the highest level since June. These indicators suggested cooling in the labour market, lifting market expectations for a September interest rate cut by the US Fed to 97%. Additionally, the US July trade deficit widened to $78.3 billion due to surging imports. To maintain ample liquidity in the banking system, the People's Bank of China conducted 1,000 billion yuan in 3-month outright reverse repo operations on September 5 via interest rate tender with multiple winning bids. This move constituted a rollover as an equivalent amount of same-tenor reverse repos matured that day. The market anticipated the central bank might also handle 300 billion yuan in maturing 6-month outright reverse repos this month, with potential volume increases to counter tightening liquidity effects from peak government bond issuance, heavy NCD maturities and stock market strength. At month-end August, mass protests triggered by unexpected incidents in Jakarta and elsewhere escalated into riots causing casualties and property damage. Although this event caused no material impact on nickel raw materials supply, stainless steel futures prices rose early-week driven by sentiment fluctuations.

Fundamentally, this week officially entered the September-October peak season. The stainless steel market widely expected monthly price increases, though current transactions remained significantly influenced by futures changes, overall demand already showed marked improvement from earlier periods. Social inventory of stainless steel declined for the ninth consecutive week, with stock levels pulling back to February levels. Moreover, high-carbon ferrochrome and high-grade NPI prices kept climbing this week, further elevating stainless steel production costs. However, driven by optimistic expectations, September's planned stainless steel production is projected to increase further, posing substantial pressure on end-user absorption capacity. Meanwhile, the market remains heavily influenced by macro policies and futures, maintaining strong uncertainty. Subsequent trends will depend on the pace of demand recovery and actual materialization of macro tailwinds.