[SMM Stainless Steel Daily Review] Positive News Boosts Stainless Steel Market, Yet Weak Demand Casts Doubt on Upward Momentum

SMM reported on December 19 that SS futures showed a strengthening upward trend. Driven by news that Indonesia might tighten nickel mine approvals, both SHFE nickel and SS futures strengthened and rose, with prices once reaching 12,835 yuan/mt during the session. In the spot market, at the beginning of the week, due to pessimistic expectations about US non-farm payrolls and unemployment data, metal futures generally weakened, and SS futures followed suit, exacerbating market pessimism. Although futures recovered somewhat after the data release, against the year-end off-season backdrop, downstream end-users had limited acceptance of high stainless steel prices, providing weak support for spot price increases. However, news emerged on Thursday evening about potential tightening of nickel mine approvals in Indonesia, raising market concerns about future nickel ore supply tightness. Consequently, SHFE nickel and SS futures surged significantly, subsequently driving spot prices higher. Social inventory fell 2.21% WoW to 926,700 mt this week.

The most-traded SS futures contract held up well. At 10:30 am, the SS2602 contract was quoted at 12,665 yuan/mt, up 275 yuan/mt from the previous trading day. In Wuxi, the spot premium/discount for 304/2B was in the range of 255-455 yuan/mt. In the spot market, the average price for cold-rolled 201/2B coil in Wuxi was reported at 8,150 yuan/mt; for cold-rolled mill-edge 304/2B coil, the average price was 12,850 yuan/mt in both Wuxi and Foshan; for cold-rolled 316L/2B coil, the price was 23,875 yuan/mt in Wuxi and Foshan; for hot-rolled 316L/NO.1 coil, the price in Wuxi was 23,100 yuan/mt; for cold-rolled 430/2B coil, the price was 7,600 yuan/mt in both Wuxi and Foshan.

Recently, with the approaching change in the US Fed Chairman and data gaps caused by the earlier US government shutdown, market concerns about uncertainty in macro policy have intensified further. Although stainless steel futures were already at relatively low levels, they maintained a fluctuating trend at lows due to a lack of strong upward momentum. Affected by the low and fluctuating futures, spot market confidence was already weak, compounded by significant year-end off-season demand characteristics, leading downstream users to primarily make just-in-time procurement. However, subsequent news that Indonesia might reduce nickel mine approvals quickly ignited market sentiment, driving both SHFE nickel and SS futures to surge simultaneously, with spot prices following the upward trend. Recently, stainless steel mills implemented production cuts, arrivals were low, and export policy adjustments—stainless steel products were reinstated under export license management, effective January 1, 2026—prompted export enterprises to accelerate processing and cargo pick-up to complete operations before the policy window closes, speeding up existing inventory drawdown. Social inventory fell 2.21% WoW to 926,700 mt during the week. On the raw material side, although high-grade NPI prices stopped rising and pulled back during the week, high-carbon ferrochrome prices strengthened somewhat. Furthermore, recent news about potential reductions in Indonesia's 2026 nickel ore quotas is expected to provide favorable support for future stainless steel costs. Overall, although short-term positive news has driven the stainless steel market higher, the progress of nickel mine approvals in Indonesia remains to be seen. Additionally, with macro policies being volatile and highly uncertain, and weak year-end demand unlikely to improve, the price increase lacks sustained momentum, posing a certain risk of a pullback in the future.