SS Futures Hit New Lows, Stainless Steel Cost Support Weakens, Spot Cargo Continues Weakness [SMM Stainless Steel Daily Report]

SMM November 21 - SS futures showed a trend of rising first and then falling. Today, although the release of US non-farm payrolls data dashed market expectations for a US Fed interest rate cut in December, leading to a broad pullback in commodity prices, SS futures bucked the trend and rose in the morning session. However, they turned lower again in the afternoon amid overall market weakness, with the intraday low once again falling below 12,300 yuan/mt. In the spot market, SS futures remained in the doldrums and tested the bottom throughout the week, further dampening market purchasing sentiment. Although stainless steel mill production declined and reduced arrivals led to some destocking in social inventories, this did not change the overall sluggish market sentiment. Additionally, during the week, a major stainless steel mill announced procurement prices for high-grade NPI and high-carbon ferrochrome. The high-grade NPI price was set at 880 yuan/mtu, and the December ferrochrome procurement price was set at 8,395 yuan/mt (50% metal content), weakening cost support for stainless steel and making it difficult for spot prices to shake off their weakness. This week, social inventories saw some destocking, down 1.28% WoW to 940,000 mt.

The most-traded SS futures contract was in the doldrums. At 10:30 am, the SS2601 contract was quoted at 12,385 yuan/mt, up 55 yuan/mt from the previous trading day. In Wuxi, the spot premium/discount for 304/2B was in the range of 335-585 yuan/mt. In the spot market, the average price for cold-rolled 201/2B coil in Wuxi was 8,025 yuan/mt; the average price for cold-rolled mill-edge 304/2B coil was 12,675 yuan/mt in Wuxi and 12,700 yuan/mt in Foshan; the price for cold-rolled 316L/2B coil was 24,300 yuan/mt in Wuxi and 24,300 yuan/mt in Foshan; the price for hot-rolled 316L/NO.1 coil was 23,700 yuan/mt in Wuxi; the price for cold-rolled 430/2B coil was 7,600 yuan/mt in both Wuxi and Foshan.

Year-end is the off-season, and stainless steel demand remains weak, with prices continuously testing and probing lower levels. Combined with the macro headwind of potentially dashed expectations for a US Fed interest rate cut in December, SS futures have successively broken through new lows since 2020. Stainless steel mill list prices are no longer firm and have shown a pullback. However, market pessimism and bearish sentiment have not dissipated, and low prices have not significantly boosted recent transactions, with traders generally reporting sluggish recent trading. Supply side, rumors of production cuts at stainless steel mills circulated widely in November, with the affected steel grades expanding from the 200-series stainless steel at the beginning of the month to the 400-series stainless steel, but the actual implementation of these cuts still requires further monitoring. Cost side, with stainless steel prices at low levels, even though high-carbon ferrochrome and high-grade NPI prices continued to fall during the week, stainless steel mills still faced the situation of costs exceeding selling prices. During the week, a major mainstream stainless steel mill announced procurement prices for high-grade NPI and high-carbon ferrochrome. The pressure to drive down prices further weakened, especially as the high-carbon ferrochrome price was significantly higher than the market retail price, indicating a clear intention to secure raw material supply. Expectations for the extent of future production cuts may therefore decrease.