[SMM Analysis] Capital Outflow and Slight Inventory Accumulation, Stainless Steel Maintains Short-Term Weak Balance [SMM Stainless Steel Futures Weekly Review]

SMM data showed that the most-traded stainless steel futures contract (SS2601) experienced concentrated position reductions and rangebound fluctuations this week (November 24-28, 2025). As of 10:30 on November 28, the contract was quoted at 12,350 yuan/mt, down 35 yuan/mt (-0.28%) from 12,385 yuan/mt at the same time last week. The most notable feature this week was the pullback in open interest. By Friday morning, open interest for the most-traded contract fell to 122,200 lots, a decrease of nearly 49,000 lots from 171,200 lots last Friday, indicating funds were primarily closing positions and exiting the market. This pattern of consolidation amid position reductions suggests that, against the backdrop of fluctuating macro expectations, the willingness for a tug-of-war between longs and shorts cooled simultaneously. After digesting previous negative factors, the futures market primarily moved with low volatility and sideways movement.

From a macro perspective, the week remained in a phase of fluctuating expectations and news-driven trading, with external disturbances and weak domestic data jointly suppressing risk appetite. Internationally, expectations for US Fed interest rate cuts remained elevated overall, but disagreements over the specific pace intensified. Early in the week, CME data showed the probability of a December rate cut once rose to about 84%, putting pressure on the US dollar index which pulled back. Subsequently, some Fed officials delivered relatively hawkish remarks, reiterating inflation risks. Combined with disruptions from news related to a Russia-Ukraine ceasefire, the US dollar index strengthened again, causing short-term fluctuations in sentiment towards global risk assets. However, this did not trigger a fundamental reassessment of rate cut expectations. Domestically, industrial enterprise profit data indicated that the recovery in domestic demand remained sluggish. Data from the National Bureau of Statistics showed that from January to October, the total profits of industrial enterprises above the designated size nationwide reached 5,950.29 billion yuan, up 1.9% YoY, but profits in October fell 5.5% YoY. Although the phone call between the Chinese and US heads of state released some positive signals, in the absence of substantive strong stimulus policies, the macro environment provided limited support for ferrous metals and stainless steel, manifesting more as sentiment-driven disturbances rather than a trend-following bullish factor.

Fundamentals side, inventory shifted from decline to increase this week, with inventory buildup pressure emerging. The latest SMM data showed that total social inventories of stainless steel rose slightly to 946,000 mt this week, up from 940,000 mt last week. Among these, inventory pressure for 300-series cold-rolled products increased somewhat, structurally showing a slowdown in destocking for cold-rolled products and some accumulation of resources in inventories. In terms of transactions, market sentiment improved slightly compared to last week, but the momentum was not sustained. After futures prices dipped to relatively low levels during the week, short-term low prices attracted some downstream just-in-time procurement. Mid-week, trading volume increased on one day and inquiry activity improved, but overall, activity remained phased and dominated by passive just-in-time procurement. As this wave of demand was released, trading weakened again towards the weekend, and restocking did not evolve into a sustained procurement cycle. Overall, the partial increase in spot trading volume failed to fully offset the pressure from incoming cargoes, the pace of destocking slowed down, and the initial inventory buildup exerted some downward pressure on prices. Whether this will evolve into a trend of inventory accumulation still requires further tracking of data in the coming weeks.

Cost side, the support center continued to shift downward. As of November 28, the offer price for high-grade NPI further pulled back to 882.5 yuan/mtu, weakening WoW; the ferrochrome offer price remained at 8,025 yuan/mt (50% metal content). The overall price center of raw materials moved down, driving the cost center of finished products at steel mills to decline simultaneously. Under the current raw material price combination, the cost level for mainstream 300-series stainless steel has retreated compared to the previous period, and the price spread between futures prices and the cost range has been temporarily repaired. The rigidity of cost support at the lower end is weaker than during the previous high-cost phase, providing relatively limited underpinning for prices.

In terms of supply, marginal contraction remains limited, making it difficult to significantly improve the futures market. Some steel mills plan to schedule maintenance and production cuts of approximately 60,000 mt starting from mid-December, mainly focused on the 200-series, which has a relatively limited impact on improving the supply-demand pattern for the main 300-series varieties. Currently, the production schedule pace of mainstream large steel mills remains tight, and broader, more substantial production cut arrangements have not yet been implemented. The overall supply side remains stable, lacking additional support for prices.

In summary, this week, the stainless steel market was influenced by multiple factors, including fluctuating macro expectations, a downward shift in the cost center, and inventory transitioning from decline to increase. The futures market overall exhibited characteristics of "position reduction + range-bound fluctuations." On the capital side, profit-taking and wait-and-see attitudes prevailed, with open interest in futures significantly pulling back. Meanwhile, the spot side saw temporary increases in volume driven by lower prices, resulting in some divergence in pace between the futures and spot markets. Before mainstream steel mills implement large-scale, substantial production cuts for the 300-series, supply pressure and inventory accumulation risks persist, and the market overall remains in a weak balance pattern, characterized by sideways movement with a bearish bias.

In the short term, stainless steel prices are likely to continue moving sideways, with directional breakthroughs depending more on the extent of supply-side adjustments and the pace of demand-side recovery.