During the holiday period, macro tailwinds supported the strength of SS, while weak fundamentals led to a wait-and-see attitude in the spot market. [SMM Stainless Steel Futures Weekly Review]

SMM data showed that the most-traded SS futures contract retreated after a rapid rise this week. As of 10:30 on October 10, the SS2512 contract was quoted at 12,835 yuan/mt, up 80 yuan/mt WoW.

Macro perspective, although US September non-farm payrolls data fell short of expectations, the US government shutdown further heightened market uncertainty, leading to a notable increase in risk-aversion sentiment. During the holiday, overseas market metal prices such as LME nickel and copper surged sharply, boosting sentiment across the commodity sector. Domestically, the central bank conducted 110 billion yuan in reverse repo operations on the first working day after the holiday, setting a new high for single-day net injections and sending a clear signal of stabilizing growth. This eased liquidity conditions in the market, driving a rebound in risk asset appetite and providing strong liquidity support for stainless steel futures, aligning their price movements with improved macro sentiment and pushing them higher.

Fundamentals, in the first week after the holiday, the domestic stainless steel market was largely inactive due to the National Day and Mid-Autumn Festival holidays, with restricted shipments and inventory movements, and spot trading suspended. However, LME nickel futures prices rose continuously starting mid-holiday, lifting nickel and stainless steel futures prices and boosting market confidence. Currently, a clear divergence exists between stainless steel market fundamentals and macro expectations. Macro perspective, the US government shutdown during the holiday drove up commodity futures prices as investors sought safe havens, coupled with expectations for two more US Fed interest rate cuts within the year, overall supporting commodity prices. However, stainless steel fundamentals remain relatively weak. Despite being in the traditional September-October peak season, downstream demand recovery has been limited, market trading has been sluggish, and social inventory has stopped falling and started to rebound. Additionally, prices of raw materials such as high-grade NPI and high-carbon ferrochrome have softened, weakening cost support for stainless steel. Going forward, attention should remain on the materialization of macro developments and changes in downstream demand.