SS Futures Retreat After Rapid Rise, Stainless Steel Spot Inquiries Cool Down [SMM Stainless Steel Daily Report]

SMM December 9 news, SS futures showed a pattern of retreating after a rapid rise. Before noon, SS futures strengthened further and explored higher, with the peak reaching 12,565 yuan/mt; in the afternoon, driven by a general decline in metal futures, SS futures also retreated significantly, closing back at 12,500 yuan/mt. In the spot market, before noon, as SS futures continued to climb, stainless steel spot traders raised their offers, but downstream end-users had limited acceptance of high prices. In the afternoon, as SS futures clearly pulled back, market caution intensified, and inquiries and transactions cooled further.

The most-traded SS futures contract held up well. At 10:30 am, SS2601 was quoted at 12,550 yuan/mt, up 25 yuan/mt from the previous trading day. In Wuxi, the spot premiums/discounts for 304/2B were in the range of 320-520 yuan/mt. In the spot market, the average price for cold-rolled 201/2B coil in Wuxi was 8,000 yuan/mt; for cold-rolled mill edge 304/2B coil, the average price in Wuxi was 12,800 yuan/mt, and in Foshan 12,800 yuan/mt; for cold-rolled 316L/2B coil in Wuxi, the price was 23,775 yuan/mt, and in Foshan 23,775 yuan/mt; for hot-rolled 316L/NO.1 coil, Wuxi reported 23,000 yuan/mt; for cold-rolled 430/2B coil, both Wuxi and Foshan were at 7,600 yuan/mt.

Recently, against the backdrop of strengthening expectations for US Fed interest rate cuts, metal futures overall have been operating with a relatively strong tone. SS futures were driven by SHFE nickel and ferrous metals futures, coupled with recent news stimulating production cuts at stainless steel mills, leading to some recovery in market confidence. Moreover, as the futures price had previously fallen to a new low since 2020, further declines faced some resistance, hence the recent stop falling and rebound. However, stainless steel's own fundamentals remain relatively weak, lacking upward momentum, resulting in limited overall gains.

Driven by the strength in SS futures, spot transactions improved somewhat. At the beginning of the week, inquiries and transactions increased noticeably. Market transactions are still largely influenced by the fluctuations in futures prices, with downstream users showing obvious periodic restocking operations. However, pessimistic sentiment in the stainless steel market has not dissipated. Due to continuously declining costs and insufficient confidence in year-end demand, after the short-term macro tailwinds were released, cautious sentiment remains strong, and transactions are likely to become sluggish again, with actual transaction prices unlikely to rise significantly. From the production side, although there were frequent reports of production cuts at stainless steel mills earlier, the actual implemented cuts in November were insufficient, only decreasing by 1.79%, to 3.394 million mt. Although production in December is expected to decline further, given that current inventory has not accumulated significantly and falling raw material prices have reduced cost pressure for stainless steel mills, attention is still needed on the actual implementation of the production cut plan. At the year-end, domestic policies primarily focus on stability, the positive impact of the US Fed's interest rate cuts on the market has been gradually digested, and the likelihood of further strong favorable policies from a macro perspective is low. Additionally, as raw material prices pull back, cost support weakens, and although stainless steel prices are already at relatively low levels, there remains a possibility of a slight drop.