Macro tailwinds drive SS to strengthen and test higher, stainless steel transactions recover but prices hold steady [SMM stainless steel daily review]

SMM reported on December 1 that SS futures showed a trend of stopping falling and rebounding, with strong performance. Influenced by heightened expectations for a US Fed interest rate cut in December, metal futures generally rose today, and SS futures also strengthened in sync, once climbing to 12,470 yuan/mt during the session. In the spot market, driven by the strength in SS futures, market sentiment improved. Additionally, stimulated by recent news of production cuts at stainless steel mills, the previously sluggish transaction situation improved, with inquiries and transactions noticeably increasing during the day. Currently, market transactions are still significantly affected by the fluctuations in futures prices, with downstream sectors showing obvious periodic restocking operations. However, after the release of macro tailwinds is complete, transactions may become sluggish again, as cautious sentiment remains strong in the market, and actual transaction prices are temporarily difficult to increase.

The most-traded SS futures contract strengthened and probed higher. At 10:30 a.m., SS2601 was quoted at 12,370 yuan/mt, up 15 yuan/mt from the previous trading day. In Wuxi, spot premiums/discounts for 304/2B were in the range of 350-550 yuan/mt. In the spot market, the average price for cold-rolled 201/2B coil in Wuxi was reported at 8,025 yuan/mt; for cold-rolled mill-edge 304/2B coil, the average price in Wuxi was 12,625 yuan/mt, and in Foshan 12,650 yuan/mt; for cold-rolled 316L/2B coil in Wuxi, 23,800 yuan/mt, and in Foshan 23,800 yuan/mt; for hot-rolled 316L/NO.1 coil, Wuxi reported 23,250 yuan/mt; for cold-rolled 430/2B coil, both Wuxi and Foshan were at 7,600 yuan/mt.

Recently, after the US Fed released dovish signals, 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 overall showed a strengthening trend. Among them, SS futures ended the continuous decline since late October and rebounded from the low point since 2020. At the same time, spot prices also rebounded in sync. 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 attitudes due to price declines, market demand noticeably recovered. Supply side, recent news of production cuts emerged from 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 conduct maintenance shutdowns in December. Although the actual implemented volume of cuts remains to be seen, an overall decline in stainless steel production may have become a foregone conclusion. Cost side, high-grade NPI prices further declined and returned. Although this price has fallen below the cost line of domestic nickel pig iron producers, it is difficult to find support under the overall weak market performance, and the cost support for stainless steel further weakened. Despite the recent rise in stainless steel spot prices driven by macro tailwinds and news of steel mills cutting production, market pessimism continues to linger due to weakening cost support and persistently weak year-end demand, leaving some risk of a pullback.