SS futures continued to rise, driving up spot stainless steel transactions and market recovery, but with a cautious sentiment [SMM Stainless Steel Daily Review]

SMM reported on November 26 that the SS futures showed a further strengthening and upward probing trend. Today, driven by the strong rise in SHFE nickel, the SS futures followed suit, rising to 12,475 yuan/mt at one point during the day. In the spot market, the strengthening of SS futures continued to have a positive effect, with recent transactions significantly recovering. Traders' willingness to offer discounts has decreased, and quotes have shown a slight upward trend. However, given the expectations for the year-end off-season and the recent decline in raw material prices, there remains a certain degree of pessimism in the market regarding future stainless steel prices, fearing that after the macro tailwinds are exhausted, prices may weaken again.

The most-traded SS futures contract stopped falling and began to recover. At 10:30 am, SS2601 was quoted at 12,380 yuan/mt, up 25 yuan/mt from the previous trading day. The spot premiums and discounts for 304/2B in Wuxi were in the range of 340-490 yuan/mt. In the spot market, the 201/2B cold-rolled coil in Wuxi was quoted at 8,025 yuan/mt; the 304/2B cold-rolled coil (with edges) averaged 12,625 yuan/mt in Wuxi and 12,650 yuan/mt in Foshan; the 316L/2B cold-rolled coil was 23,800 yuan/mt in both Wuxi and Foshan; the 316L/NO.1 hot-rolled coil was 23,250 yuan/mt in Wuxi; and the 430/2B cold-rolled coil was 7,600 yuan/mt in both Wuxi and Foshan.

In the year-end off-season, stainless steel demand remained sluggish, with prices continuously bottoming out and probing lower. Additionally, influenced by the potential disappointment of expectations for a US Fed interest rate cut in December, a macro headwind, the SS futures fell to new lows since 2020. Stainless steel mills' selling prices also lost their firmness, showing a pullback. However, the market's bearish sentiment has not dissipated, and low prices have not significantly boosted recent transactions, with traders generally reporting sluggish activity. Supply side, rumors of production cuts at stainless steel mills circulated in the market in November, with the affected grades expanding from 200-series to 400-series stainless steel. However, the actual implementation of these cuts still needs further observation. Cost side, despite the continuous decline in high-carbon ferrochrome and high-grade NPI prices within the week, stainless steel mills still faced an inverted cost-price situation. A major stainless steel mill announced procurement prices for high-grade NPI and high-carbon ferrochrome, indicating a reduced pressure to drive down prices, especially as the high-carbon ferrochrome price was notably higher than the market retail price, clearly aiming to secure raw material supply. Expectations for future production cut reductions may decrease.