SS Futures Pull Back, Stainless Steel Spot Trading Weakens [SMM Stainless Steel Daily Report]

SMM, December 4 - SS futures pulled back. Macro tailwinds were largely digested by the market, with stainless steel returning to fundamentals. SS prices fell, hitting an intraday low of 12,400 yuan/mt. Spot market, SS futures retreated, bolstering cautious wait-and-see sentiment. Additionally, as concentrated buying occurred early in the week, downstream demand was met phase-wise, leading to sluggish spot transactions. Stainless steel spot prices held steady. Social inventory accumulated this week, up 0.1% WoW to 946,900 mt.

The most-traded SS contract was in the doldrums. At 10:30 a.m., SS2601 was quoted at 12,455 yuan/mt, flat from the previous trading day. In Wuxi, spot premiums/discounts for 304/2B were in the range of 315-515 yuan/mt. In the spot market, the average price for cold-rolled 201/2B coil in Wuxi was 7,950 yuan/mt; the average price for cold-rolled mill edge 304/2B coil was 12,700 yuan/mt in both Wuxi and Foshan; the price for cold-rolled 316L/2B coil was 23,775 yuan/mt in both Wuxi and Foshan; the price for hot-rolled 316L/NO.1 coil in Wuxi was 2,300 yuan/mt; the price for cold-rolled 430/2B coil was 7,600 yuan/mt in both Wuxi and Foshan.

Recently, amid rising expectations for US Fed interest rate cuts, metal futures generally trended higher. SS futures were lifted by SHFE nickel and ferrous metals futures, coupled with recent news of production cuts at stainless steel mills, which helped restore some market confidence. Furthermore, after hitting a new low since 2020, further downside was limited, leading to a recent rebound. However, stainless steel's weak fundamentals limited upside momentum, resulting in modest gains.

Driven by stronger SS futures, spot transactions improved. Inquiries and deals increased notably early in the week. Market activity remained heavily influenced by futures movements, prompting clear phase-wise restocking by downstream users. However, pessimism in the stainless steel market persisted. With costs declining and lack of confidence in year-end demand, cautious sentiment remained strong after short-term macro tailwinds faded. Transactions were likely to turn sluggish again, with little room for a significant rise in actual transaction prices. On production, despite frequent news of production cuts earlier, actual cuts in November were limited, down only 1.79% to 3.394 million mt. Although December output is expected to fall further, given that inventory has not accumulated significantly and lower raw material prices have eased cost pressure on mills, the actual implementation of production cut plans warrants close attention. At the year-end, domestic policies primarily focus on stability, and the positive impact of the US Fed's interest rate cuts on the market has gradually been digested. From a macro perspective, the likelihood of further strong favorable policies being introduced is low. Additionally, as raw material prices pull back, cost support weakens. Although stainless steel prices are already at relatively low levels, there remains a possibility of a slight drop.