Macro Tailwinds Temporarily Exhausted, SS Futures Pull Back, Stainless Steel Spot Trading Weakens [SMM Stainless Steel Daily Report]

SMM reported on November 28 that SS futures showed a further downward trend. The weak fundamentals of stainless steel and insufficient market confidence led to further declines today, with the low point approaching 12,300 yuan/mt again. In the spot market, sentiment recovered earlier in the week due to macro tailwinds, and trading activity improved significantly before mid-week. However, as futures pulled back, cautious wait-and-see sentiment again dominated the market. Coupled with consecutive declines in high-grade NPI prices, expectations weakened again, and prices remained largely stable during the week. Social inventory saw a buildup this week, rising 0.64% WoW to 946,000 mt.

The most-traded SS futures contract fell back. At 10:30 a.m., the SS2601 contract was quoted at 12,355 yuan/mt, down 40 yuan/mt from the previous trading day. In Wuxi, the spot premium/discount for 304/2B was in the range of 365-565 yuan/mt. In the spot market, the average price of cold-rolled 201/2B coil in Wuxi was 8,025 yuan/mt; the average price of cold-rolled trimmed 304/2B coil was 12,625 yuan/mt in Wuxi and 12,650 yuan/mt in Foshan; the price of cold-rolled 316L/2B coil was 23,800 yuan/mt in Wuxi and 23,800 yuan/mt in Foshan; the price of hot-rolled 316L/NO.1 coil in Wuxi was 23,250 yuan/mt; the price of cold-rolled 430/2B coil was 7,600 yuan/mt in both Wuxi and Foshan.

Recently, after the US Fed signaled a dovish stance, the possibility of an interest rate cut in December increased again, and US dollar liquidity may further ease. Driven by this macro tailwind, the metal futures market generally showed a strengthening trend. Among them, SS futures ended the continuous decline since the end of October and rebounded from the low since 2020. At the same time, spot prices also rebounded. Influenced by the market mentality of rushing to buy amid continuous price rise and holding back amid price downturn, along with trading firms engaging in both spot and futures markets purchasing spot cargo to close short futures positions, plus the concentrated release of demand previously suppressed by cautious wait-and-see sentiment due to price declines, market demand clearly recovered. Supply side, recent news indicated production cuts at several steel mills. The scope of cuts mainly expanded from 200-series stainless steel to 400-series, and a steel mill in Guangxi planned to suspend production for maintenance in December. Although the actual implemented reduction remains to be seen, an overall decline in stainless steel production appears certain. Cost side, high-grade NPI prices fell further. Although the price has fallen below the cost line of domestic NPI producers, it is difficult to find support amid overall weak market performance, and cost support for stainless steel further weakened. Although stainless steel prices recently rose due to macro tailwinds and news of production cuts at steel mills, weakened cost support and persistently weak year-end demand kept market pessimism prevalent, leaving some risk of a pullback.