Macro Positive Expectations Exhausted, Market Returns to Fundamentals, Weak Demand, Stainless Steel Prices in the Doldrums [SMM Stainless Steel Daily Report]

SMM October 31 – SS futures trended downward. Today, SS and SHFE nickel futures weakened in tandem, with prices approaching 12,600 yuan/mt during the session. In the spot market, the continued weakness in SS futures further dampened market confidence. Coupled with already sluggish transactions, traders lowered their offers further. Stainless steel spot prices remained in the doldrums throughout the week. As bullish macro factors were fully priced in, the rally in SS futures paused, with the market refocusing on fundamentals, where weak downstream demand dominated. Although there were reports of production cuts at stainless steel mills, the actual implementation remains to be seen. Social inventory increased slightly WoW, up 0.04% to 946,800 mt.

The most-traded SS2512 futures contract declined. At 10:30 a.m., SS2512 was quoted at 12,710 yuan/mt, down 60 yuan/mt from the previous trading day. In Wuxi, spot premiums/discounts for 304/2B were in the range of 260-610 yuan/mt. In the spot market, the average price for cold-rolled 201/2B coil in Wuxi was 8,050 yuan/mt; the average price for cold-rolled mill-edge 304/2B coil was 12,950 yuan/mt in both Wuxi and Foshan; cold-rolled 316L/2B coil was 25,300 yuan/mt in Wuxi and Foshan; hot-rolled 316L/NO.1 coil was quoted at 24,800 yuan/mt in both locations; cold-rolled 430/2B coil was 7,600 yuan/mt in both Wuxi and Foshan.

Although SS futures had been rising steadily earlier, their positive impact on the stainless steel spot market was limited. The traditional peak consumption season for stainless steel, the September-October peak season, ended earlier than expected. Downstream end-users were predominantly cautious and adopted a wait-and-see stance, mostly purchasing as needed, resulting in weak demand. In October, stainless steel production remained at relatively high levels, keeping market digestion pressure elevated. Social inventory of stainless steel ended its previous destocking trend and recently showed signs of inventory buildup. Cost side, although the November steel tender price for high-carbon ferrochrome was announced steady this week, retail prices remained in the doldrums. High-grade NPI saw a slight decline due to steel mills' efforts to drive down prices, leading to a downward shift in the cost center for stainless steel. Recently, several stainless steel mills announced production cuts for the 200-series stainless steel, but output for the 300-series and 400-series remained largely stable. The overall reduction in actual production is expected to be limited. China-US trade friction eased significantly, with previously imposed tariffs suspended, creating a favorable macro policy environment. However, the current weak fundamentals remain difficult to improve, and further attention is needed on the implementation of production cuts by stainless steel mills.