[SMM Analysis] Macro Tailwinds Materialize, Funds Take Profits at High Levels, Spot Cargo Transactions Weaken and Return to Fundamentals [SMM Stainless Steel Futures Weekly Review]

SMM data showed that the most-traded stainless steel futures contract (SS2602) exhibited a significant "rise first then fall" pattern this week (December 8-12, 2025). As of 10:30 on December 12, the contract price was 12,565 yuan/mt, down 25 yuan/mt (-0.2%) from last Friday's closing price of 12,590 yuan/mt. Although the decline was relatively small, futures volatility was intense.

This week's macro trading narrative primarily revolved around the US Fed's monetary policy. The Fed announced a 25-basis-point interest rate cut as expected on Wednesday. Although this easing measure was implemented, the market lacked further positive surprises as the rate cut expectations had already been largely priced in. The early-week rally had exhausted some of the positive factors, and with the event concluded, the market displayed a typical "buy the rumor, sell the news" dynamic, with funds choosing to take profits and exit at high levels. Coupled with overnight declines in LME nickel and SHFE nickel due to risk-off sentiment, this led to a technical pullback in stainless steel futures, erasing most of the week's gains.

Fundamentally, spot market sentiment was highly correlated with futures, turning weak quickly after a brief recovery, with the supply-demand imbalance becoming more pronounced towards the week's end. In the early and mid-week, driven by futures gains, inquiry activity improved temporarily in the Foshan and Wuxi markets, leading to some restocking for rigid demand and speculative purposes. However, as steel mills adopted a strategy of holding opening prices steady while increasing shipment volumes, the willingness to chase higher prices was dampened. Entering the latter part of the week, alongside the futures pullback from highs, spot transactions became extremely sluggish, with 304 cold-rolled prices generally retreating by 20-50 yuan/mt, and the proportion of transactions at lower prices increased. The latest SMM data showed social inventory edged up to 948,000 mt this week (last week: 947,000 mt). Against the off-season backdrop, the continued inventory build-up, combined with year-end pressure on agents to fulfill volume agreements for cargo pick-up, forced the spot market to adopt volume discount strategies, yet the destocking effect remained limited.

Cost side, positive signals of stabilization and recovery emerged this week. Unlike the previous sustained decline in raw material prices, the cost side showed signs of bottoming out and rebounding. As of December 12, high-grade NPI prices recovered to 888.5 yuan/mtu (last week: 881 yuan), and high-carbon ferrochrome prices were also raised to 8,075 yuan/mt (50% metal content). The firmness in raw material prices effectively solidified the underlying cost support, which, to some extent, limited the downside room for futures. Although spot demand remains weak and destocking pressure persists, the upward shift in the cost center provided crucial defense for the price floor, preventing a deep decline in futures.

Overall, this week's market movement essentially represented a technical adjustment following the full digestion of prior macro tailwinds, superimposed with negative feedback from year-end spot circulation pressures. After digesting the mid-week sentiment-driven rise, the market has returned to the reality of weak fundamentals. Looking ahead to next week, as macro sentiment returns to rationality, the spot side faces dual pressures from high inventory and year-end cargo pick-up, lacking upward momentum. Subsequently, close attention should be paid to the sustainability of the cost side's resilience against the trend and its support effect on the downside. It is expected that futures will remain in the doldrums in the short term, with vigilance against further downward tests of cost support.