Macro Disturbances Coupled with Cost Collapse, Downstream Zero Buying the Dip Weighs on Futures [SMM Stainless Steel Futures Weekly Review]

SMM data showed that the most-traded stainless steel futures contract (SS2601) WoW was characterized by "intensified external disturbances and collapsed cost support." As of 10:30 on November 21, the contract was quoted at 12,385 yuan/mt, up a mere 5 yuan/mt (+0.04%) from the closing price of 12,380 yuan/mt on November 14. Open interest side, funds engaged in fierce competition WoW, showing a clear pattern of "increasing first then decreasing." Open interest once climbed to a high of 192,400 lots mid-week, indicating funds attempted to enter the market; however, by Friday's close, open interest quickly pulled back to 171,200 lots (a sharp decrease of 21,200 lots from Thursday), only a slight increase of 3,500 lots compared to the 167,700 lots recorded the previous Friday. The significant reduction in open interest on Friday directly confirmed that, under the dual pressures of macro uncertainty and declining costs, bulls' confidence collapsed, choosing to exit for safety before the weekend, thereby driving the futures price center lower.

Macro perspective, the unusual absence of overseas data WoW triggered sharp fluctuations in market sentiment, while domestic policy entered a vacuum observation period. Internationally, the US Bureau of Labor Statistics unexpectedly canceled the release of the October non-farm payroll report, a rare "black swan" event that plunged the market into an information vacuum, greatly increasing uncertainty regarding policy expectations. Coupled with the previously reported September unemployment rate rising to 4.4% and the US Fed meeting minutes revealing heightened internal divisions, market bets on a December interest rate cut cooled significantly, with the probability dropping from around 50% to approximately 33%. Although US Fed Governor Waller delivered dovish remarks attempting to soothe the market, the risk-off sentiment triggered by the data absence kept commodities under pressure. Domestically, the macro front was relatively quiet WoW. Although the launch of a railway project by China, Tanzania, and Zambia bolstered long-term infrastructure expectations, the lack of strong policies directly stimulating domestic demand meant the macro front provided no effective upward drive for the metals sector.

Fundamentals, weakness and "negative feedback" characteristics on the demand side became increasingly pronounced, with market transactions falling into deep wait-and-see sentiment. Downstream purchase sentiment WoW was clearly dominated by "wait-and-see" and "just-in-time procurement," with no "buying the dip" behavior observed. The price cuts by major steel mills at the start of the week not only failed to effectively stimulate sales but also dampened market confidence, exacerbating the downstream "rush to buy amid continuous price rise and hold back amid price downturn" wait-and-see sentiment. Market feedback indicated persistently sluggish transactions throughout the week, with downstream customers generally delaying restocking, and traders' destocking efforts through price cuts falling short of expectations. SMM data showed social inventory dropped to 940,000 mt WoW, a decrease of 12,000 mt from 952,000 mt the previous week. However, against the backdrop of extremely sluggish transactions, the alleviation of inventory pressure failed to translate into effective support for the futures market.

Cost side, the significant decline was the biggest bearish driver for this week and subsequent market performance. SMM data showed that as of November 21, the raw material market entered a negative feedback loop, with high-grade NPI offers falling below the 900 mark to 890.5 yuan/mtu, down 15 yuan/mtu WoW; high-carbon ferrochrome also dropped to 8,000 yuan/mt (50% metal content), down 75 yuan/mt (50% metal content) WoW. The dual plunge in raw materials directly led to a substantial decline in the theoretical production cost line of stainless steel, breaking the logic for steel mills and suppliers to hold prices firm. Overall, the stainless steel market faced a triple whammy this week: chaotic macro expectations, invalid cost support, and zero downstream buying the dip. Looking ahead to next week, as price cuts failed to stimulate demand release and raw materials have not yet stabilized, the most-traded stainless steel contract is expected to remain under pressure. If NPI prices continue to fall, the futures center is likely to follow the cost downward, maintaining a fluctuating trend in the doldrums.