Limited Macro Easing Signals Stainless Steel Futures in the Doldrums [SMM Stainless Steel Futures Weekly Review]

SMM data showed that the most-traded stainless steel futures contract (SS2512) was in the doldrums and struggled to rebound this week. As of 10:30 on November 7, the contract was quoted at 12,560 yuan/mt, down 135 yuan/mt (-1.1%) from the closing price of 12,695 yuan/mt on October 31. After consecutive declines, the futures briefly stabilized, but the overall price center continued to move lower.

From a macro perspective, although the US Fed announced a 25-basis-point interest rate cut last week, lowering the target range for the federal funds rate to 3.75%–4.00%, the effect was offset by the US government shutdown and liquidity tightening. The overnight financing rate (SOFR) rose sharply, financial constraints intensified in the banking system, and market financing costs actually increased. Meanwhile, US layoffs in October hit their highest level since 2003, and the unemployment rate may have risen to 4.4%, raising concerns about an economic recession. Overall risk appetite did not rebound significantly, providing limited support for commodity prices.

Domestically, the policy stance continued its pro-growth orientation. The People's Bank of China conducted 700 billion yuan in reverse repo operations on November 5 to maintain reasonably ample liquidity. The MIIT recently issued guidance for the steel industry, proposing to develop high value-added steel products and strictly implement capacity replacement mechanisms to optimize the industrial structure and curb low-end capacity expansion. This move is expected to improve the supply side in the medium and long term, but it is still difficult to offset the pressure from weak demand in the short term.

Fundamentally, weak demand remained the dominant market issue. October's stainless steel production schedule was approximately 3.45 million mt, keeping supply at high levels. Downstream consumption showed no signs of improvement, with end-users purchasing mainly on demand, leading to sluggish market transactions. Some traders accelerated shipments and sold at low prices to meet month-end repayment pressures, making it difficult for spot prices to find effective support.

Social inventory stood at 945,500 mt, slightly down by 1,300 mt WoW from 946,800 mt, indicating a slowdown in the destocking pace. News of production cuts in the 200-series provided a temporary boost to market sentiment, but the overall supply-demand pattern saw no substantial change.

Cost side, prices continued to decline. As of November 7, high-grade NPI was quoted at 916 yuan/mtu (down 8 yuan from 924 last Friday), and high-carbon ferrochrome was quoted at 8,150 yuan/mt (50% metal content) (down 125 yuan from 8,275 last week). The continued decline in raw material prices weakened cost support and limited the room for finished product prices to rebound.

Overall, stainless steel futures received limited support from macro easing expectations this week, with weak demand and falling raw material costs dominating the market trend. Although last week's Fed rate cut and domestic reverse repo operations signaled easing, global liquidity tightening, sluggish domestic demand, and continuously falling raw material prices collectively weighed on stainless steel prices. In the short term, the market is expected to remain in the doldrums. Attention should be paid to adjustments in the November production schedule, inventory changes, and the trend of raw material prices.