Stainless Steel Futures Hit Bottom and Rebounded, Market Wait-and-See Sentiment Persisted, Inquiries Increased but Transactions Were Insufficient [SMM Stainless Steel Daily Report]

SMM October 16 - SS futures showed a pattern of hitting bottom and rebounding. During yesterday's night session, dragged down by the pullback in SHFE nickel and ferrous metals, SS futures further explored lower levels. By the morning opening, they once fell below 12,500 yuan/mt. In the afternoon, driven by SHFE nickel's halt in decline and strengthening, SS followed the upward trend, rising to 12,615 yuan/mt by the close. In the spot market, influenced by the weakness in SS futures before noon, spot transactions were relatively sluggish, and offers moved lower. In the afternoon, spurred by the futures rebound, market offers followed the rise, and inquiry activity increased. Stainless steel prices are currently at relatively low levels, and steel mills are already facing inverted cost prices. However, market transactions are significantly affected by the fluctuations in futures, and downstream players maintain a strong wait-and-see sentiment. This week, social inventory increased substantially, up 5.19% WoW, reaching 952,600 mt.

Futures side, the most-traded contract 2512 strengthened after a dip and rebound. At 10:30 AM, SS2511 was quoted at 12,525 yuan/mt, down 40 yuan/mt from the previous trading day. In Wuxi, spot premiums/discounts for 304/2B were in the range of 445-745 yuan/mt. In the spot market, the average price for cold-rolled 201/2B coil in Wuxi was 8,000 yuan/mt; the average price for cold-rolled mill edge 304/2B coil was 12,950 yuan/mt in both Wuxi and Foshan; the price for cold-rolled 316L/2B coil was 25,500 yuan/mt in both Wuxi and Foshan; the price for hot-rolled 316L/NO.1 coil was 24,950 yuan/mt in both locations; the price for cold-rolled 430/2B coil was 7,600 yuan/mt in both Wuxi and Foshan.

During the National Day and Mid-Autumn Festival holiday, the domestic stainless steel market was generally on holiday, with shipments and warehouse movements restricted, and spot transactions suspended. However, LME nickel futures prices rose consecutively starting from the middle of the holiday, boosting nickel and stainless steel futures prices and strengthening market confidence. Currently, there is a significant divergence between the fundamentals of the stainless steel market and macro expectations. From a macro perspective, the US government shutdown during the holiday 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 environment is favorable for commodity prices. However, stainless steel fundamentals appear somewhat weak. Despite being in the traditional September-October peak consumption season, downstream demand recovery is limited, market transactions are relatively sluggish, and social inventory has shown a trend of stopping declines and rebounding. Furthermore, prices for raw materials like high-grade NPI and high-carbon ferrochrome have softened, leading to a weakening cost support for stainless steel. Going forward, attention should remain on the realization of macro news and changes in downstream demand.