[SMM Analysis] Macro and Mine Disturbances Combined with Better-Than-Expected Inventory Drawdown, Futures Bottom Out Significantly [SMM Stainless Steel Futures Weekly Review]

SMM data shows that this week (December 15-19, 2025), the most-traded stainless steel contract (SS2602) exhibited a significant "bottom out" trend. As of 10:30 on December 19, the contract was quoted at 12,680 yuan/mt, up 115 yuan/mt (+0.92%) from 12,565 yuan/mt at 10:30 last Friday. At the beginning of the week, the futures were under pressure and fell smoothly to a weekly low of 12,290 yuan/mt, dragged down by macro risk aversion sentiment and "destocking at low prices" in the spot market. Mid-week, the market logic underwent a critical shift. Discussions about potential tightening of Indonesian ore quotas (RKAB) for 2026 or lower production targets led to rapidly rising expectations of supply contraction. Coupled with SMM inventory data showing an unexpected destocking, this triggered a concentrated exodus of short-term bearish funds, with large-scale "short covering" pushing the futures to quickly narrow the spot-futures price spread. The night session saw a high of 12,820 yuan/mt, with the weekly candlestick recording a long-lower-shadow bullish candlestick, indicating a significant upward shift in the center.

From a macro perspective, the easing of US inflation data provided a marginally improved external environment for the non-ferrous metals sector. The US November CPI data showed a trend of easing inflationary pressures: core CPI rose 2.6% YoY, falling to its lowest level since March 2021; overall CPI recorded 2.7% YoY, matching the figure from July this year. Although the energy component rebounded slightly due to short-term geopolitical disruptions, the slowdown in growth of core components such as food indicated that the downward trend in the inflation center had not changed. The release of this data to some extent corrected the market's previous over-worries about tightening policies, helping to ease the financial attribute pressure on commodities. However, it should be noted that the data collection was affected by shutdowns, posing a certain risk of distortion, and the market remains cautious in interpreting single-month data.

From a fundamental perspective, the main drivers of the market this week stemmed from the resonance of "supply-side expectation gaps" and "substantial destocking." Trading was sluggish at the beginning of the week, with traders mostly adopting volume discount strategies to recover funds. However, news of Indonesia cutting nickel ore quotas became the key variable changing supply and demand expectations, drawing attention to the potential for future raw material supply contraction. Meanwhile, the latest SMM data showed that social inventory dropped significantly to 927,000 mt (from 948,000 mt last week), with a single-week destocking of over 20,000 mt. This destocking exceeded market expectations, confirming that downstream rigid demand still exists at low price levels, and the establishment of the inventory turning point provided a solid spot foundation for the price rebound.

On the cost side, immediate raw material prices demonstrated strong resilience. SMM data shows that as of December 19, high-grade NPI quotes were slightly adjusted to 884 yuan/mtu (from 888.5 yuan/mtu last week), while high-carbon ferrochrome quotes were raised to 8,150 yuan/mt (50% metal content). The pattern of "minor adjustments in nickel-iron and firmness in ferrochrome" on the raw material side has generally solidified the cost defense line for smelting. Coupled with uncertainties surrounding Indonesia's nickel ore quota policy, the market has begun to reassess future cost expectations. If the logic of tightening ore supply materializes, support from the cost side will further strengthen, limiting downside room for prices.

Overall assessment: this week's market performance represented a valuation correction of previous pessimistic expectations, reflected in the capital flow as significant short covering and profit-taking. Policy disruptions in Indonesia's ore sector constituted the core driver of the rebound, while an unexpected drawdown in inventories confirmed the resilience of consumption at the bottom. Looking ahead to next week, the market will enter a phase of verifying news flows, requiring close attention to the implementation of Indonesia's quota policy and the sustainability of high-priced spot transactions. Against the backdrop of significantly eased inventory pressure, the futures market has found support at the bottom. However, given that the upward momentum primarily stems from short covering rather than increased long positions, it is expected to maintain a relatively strong, consolidating pattern in the near term, digesting technical resistance above.