Weak Demand Dominates the Market, Stainless Steel Futures Retreat After Rapid Rise [SMM Stainless Steel Futures Weekly Review]

SMM data showed that the most-traded stainless steel futures contract (SS2512) retreated after a rapid rise this week. As of 10:30 on October 31, the SS2512 contract closed at 12,695 yuan/mt, down 115 yuan/mt (-0.9%) from the closing price of 12,810 yuan/mt on October 24. After the previous rebound, futures lacked momentum, with significant capital outflows, and market sentiment turned cautious.

From a macro perspective, the US Fed announced a 25-basis-point interest rate cut on October 29, lowering the target range for the federal funds rate to 3.75%–4.00%. The rate cut boosted risk appetite in the short term and weighed on the US dollar index. However, China's manufacturing PMI for October was 49, down 0.8 percentage points MoM, returning to contraction territory, indicating weak manufacturing recovery and insufficient demand. Coupled with continued declines in real estate investment and delayed end-user procurement, overall demand signals remained weak. Meanwhile, the resumption of communication between Chinese and US trade teams provided some support to market sentiment but has not yet translated into actual demand improvement.

Fundamentally, weak demand is the core contradiction in the current market. October stainless steel production schedule was approximately 3.44-3.46 million mt, increasing slightly MoM. Downstream end-user procurement enthusiasm was low, and although traders raised offers following futures, transactions were clearly unsatisfactory, with spot prices struggling to rise. Market rumors of production cuts in the 200-series provided slight support to futures sentiment but have not yet substantially impacted the overall supply-demand pattern. Raw material prices may face periodic pressure as a result.

Social inventory stood at 946,800 mt, a slight increase of 400 mt WoW from 946,400 mt, indicating persistent inventory pressure. Spot market transactions were inactive, with low spot prices. Traders accelerated sales at month-end to recoup cash, resulting in weak momentum for spot prices to follow futures gains. Although futures strengthened last week, spot prices did not rise in sync with the futures rally, leading to a passive narrowing of the futures-spot price spread this week, reflecting continued weakness in actual market transactions.

Cost side, high-grade NPI prices continued to decline, falling to 924 yuan/mtu from 930.5 yuan/mtu last Friday; high-carbon ferrochrome prices dropped to 8,275 yuan/mt (50% metal content) from 8,400 yuan/mt (50% metal content). Weakening raw material prices eroded cost support, and combined with sluggish demand, further limited the room for stainless steel price rebound.

Overall, stainless steel futures received a brief boost from macro factors such as the rate cut and China-US trade talks this week, but weak demand, a slight inventory increase, and declining raw material prices collectively weighed on price performance.