Macro Tailwinds Weaken, Returning to Fundamentals, Limited Recovery in Stainless Steel Peak Season Demand [SMM Stainless Steel Futures Weekly Review]

SMM data showed the most-traded SS futures contract was in the doldrums this week. As of 10:30 on September 26, the SS2511 contract was quoted at 12,840 yuan/mt, down 30 yuan/mt WoW.

From a macro perspective, the US Fed announced its first interest rate cut since December 2024 last week, lowering the target range for the federal funds rate by 25 basis points to 4.00%-4.25%. The US dollar index initially fell but then fluctuated. The market widely believed this move provided breathing room for non-US currencies and helped boost global risk asset appetite. On September 25, the central bank conducted 600 billion yuan in medium-term lending facility (MLF) operations. After offsetting the maturing amount for the month, this resulted in a net injection of 300 billion yuan, marking the seventh consecutive month of increased rollovers. Combined with the 300 billion yuan net injection via buyout-style reverse repo operations this month, the total net injection of medium-term liquidity in September reached 600 billion yuan. The impact of macro news on the stainless steel market weakened this week, with the market gradually returning to fundamentals.

Fundamentally, despite the traditional September-October peak season for consumption, downstream end-use demand recovery was quite limited, and market purchasing sentiment remained sluggish. Approaching the National Day holiday, pre-holiday stockpiling demand failed to materialize, leading to mediocre transactions during the week. The 11-week consecutive destocking process for stainless steel social inventory ended, with social inventory increasing WoW. Although some stainless steel mills' production was affected by ultra-low emission upgrades and maintenance this month, overall stainless steel planned production remained at a relatively high level, and supply was generally loose. Coupled with the exhaustion of short-term macro policy positives, SS futures were generally in the doldrums during the week, with insufficient market confidence. Furthermore, on the raw material side, although Tsingshan raised its steel mill tender price for high-carbon ferrochrome for October, consistent with prior market expectations, retail ferrochrome prices had already reached a considerable level, ending the previous strengthening and bullish trend, with overall prices largely stable. High-grade NPI prices softened during the week, weakening cost support for stainless steel. Although current market sentiment is weak, given it is still the traditional peak season, inventory, while having increased, remains at low levels, and stainless steel mills still face losses, stainless steel prices are unlikely to see a significant pullback in the short term.