Macro Disturbances Weaken Sentiment, Raw Materials Continue to Decline, Stainless Steel Futures Center Shifts Lower [SMM Stainless Steel Futures Weekly Review]

SMM data showed that the most-traded stainless steel contract (SS2512) experienced a "center-down" trend this week. As of 10:30 on November 14, the contract was quoted at 12,340 yuan/mt, down 220 yuan/mt (-1.8%) from the quote of 12,560 yuan/mt at 10:30 on November 7. The futures continued to probe lower on the basis of previous weakness, with some technical recovery in between, but the pressure from the upper moving average was evident, and the overall center kept shifting downward.

From a macro perspective, although the US Fed announced a 25-basis-point interest rate cut, its effect was offset by the liquidity crunch caused by the previous US government shutdown. This week, the US House of Representatives passed a funding bill with a 222-209 vote, providing funds for food assistance, federal employee salaries, and the resumption of air traffic control operations, marking the end of a record 43-day federal government shutdown. The end of the shutdown alleviated concerns over "disorder" in the US economy, leading to a short-term repair in risk appetite. However, employment and manufacturing data remained weak, limiting the macro support for commodities.

Domestically, the policy tone continued to focus on "stabilizing growth and promoting investment." The most notable development this week was the release of Several Measures to Further Promote Private Investment by the General Office of the State Council on November 11. The document proposed 13 targeted measures, including guiding private capital into low-altitude economy infrastructure, increasing central budgetary support for eligible private investment projects, and supporting more private investment projects to issue infrastructure REITs. These measures aim to improve private investment expectations, expand effective investment scale, and strengthen funding supply in the manufacturing and infrastructure sectors. In the medium and long term, these measures are expected to support stainless steel demand, particularly in transportation, energy, and equipment manufacturing. However, in the short term, due to slow economic recovery and insufficient terminal orders, their direct boost to spot consumption is limited, and overall demand remains in the doldrums.

Fundamentally, weak demand remains the core issue in the stainless steel market. Terminal purchases have been mainly need-based, with weak market transactions. The slight rise in the futures earlier did not see follow-through in the spot market, and the pullback in futures this week to some extent reflected the convergence of futures and spot prices. The 200-series consumption also remained weak, with a heavy wait-and-see sentiment. Traders were selling at lower prices to move volume, and overall demand recovery was slow.

Social inventory stood at about 952,000 mt, up slightly WoW, with a slow destocking pace. With inventory at a relatively high level and weak transactions, the spot market lacked sufficient support, thus capping the rebound in futures.

The cost side continued to decline. As of November 14, the quotation for high-grade NPI was around 905.5 yuan/mtu, and that for high-carbon ferrochrome was around 8,075 yuan/mt (50% metal content), both declining to varying degrees WoW. The continued weakening of raw material prices further pushed down the cost line of stainless steel, limiting the upside room for finished product prices and making it difficult to provide effective support.

Overall, stainless steel futures saw limited support from macro easing expectations this week, with weak demand and declining raw material prices continuing to dominate the market. The end of the US shutdown provided a temporary boost to market sentiment, but it was not enough to reverse the weak trend. Domestically, policies supporting private investment are expected to improve manufacturing and infrastructure investments in the medium and long term, but short-term demand remains sluggish. High inventory levels, sluggish transactions, and declining costs collectively weighed on stainless steel prices. In the short term, the market is expected to remain in the doldrums, with attention on production schedule adjustments, inventory changes, and whether raw material prices can stabilize.