Stainless Steel Trading Remained Sluggish on the First Day of Work Resumption, Macro Tailwinds Unable to Offset Weak Fundamentals [SMM Analysis]

During the National Day and Mid-Autumn Festival holidays, the domestic stainless steel market was generally in a holiday mode, with shipments and warehouse movements restricted, and spot transactions suspended. However, LME nickel futures prices rose continuously during the holidays, which is expected to drive up nickel and stainless steel futures prices, boosting market confidence.

On the first day after the holidays, industry participants gradually resumed work, but the spot market continued the sluggish trend seen before the holidays, with downstream end-users maintaining a cautious wait-and-see approach to purchases. In addition, SS futures weakened in the morning session due to the decline in the ferrous metals series, and morning spot quotations were largely unchanged from pre-holiday levels. In the afternoon, as SHFE nickel futures continued to strengthen, driving SS futures to follow the upward trend, afternoon quotations rose slightly, but downstream acceptance of high prices remained limited.

Currently, there is a clear divergence between the fundamentals of the stainless steel market and macro expectations. From a macro perspective, the US government shutdown during the holidays spurred safe-haven demand for funds, pushing up commodity futures prices overall. Coupled with expectations for two more US Fed interest rate cuts within the year, the overall outlook is favorable for commodity prices. However, the fundamentals of stainless steel appear relatively weak. Although the market is still in the traditional peak consumption season of September-October, downstream demand recovery has been limited, market transactions remain sluggish, and social inventory has shown signs of stopping its decline and rebounding. Additionally, prices of raw materials such as high-grade NPI and high-carbon ferrochrome have softened, leading to a weakening cost support for stainless steel. Going forward, it will be necessary to monitor the implementation of macro news and changes in downstream demand.