SMM December 26 - SS futures were in the doldrums. The upward momentum for SHFE nickel weakened, and the rally in SS futures loosened, with prices fluctuating considerably during the day, hitting a low of 12,895 yuan/mt. In the spot market, news that Indonesian nickel ore approvals might tighten impacted sentiment this week. SS futures surged significantly, pulling the spot market higher. Additionally, cost-side support for stainless steel strengthened as high-grade NPI prices also firmed. However, downstream acceptance of high stainless steel prices was poor during the year-end off-season, with transactions mainly relying on traders offering discounts. After Thursday, the impact of the news faded, and stainless steel prices saw a slowdown in their rally as focus returned to fundamentals. Social inventory dropped 3.7% WoW to 892,400 mt.
The most-traded SS futures contract was in the doldrums. At 10:30 am, the SS2602 contract was quoted at 12,925 yuan/mt, down 10 yuan/mt from the previous trading day. In Wuxi, spot premiums/discounts for 304/2B were in the range of 195-445 yuan/mt. In the spot market, the average price for Wuxi cold-rolled 201/2B coil was 8,200 yuan/mt; the average price for cold-rolled mill edge 304/2B coil was 13,075 yuan/mt in both Wuxi and Foshan; the price for cold-rolled 316L/2B coil was 24,150 yuan/mt in both Wuxi and Foshan; the price for hot-rolled 316L/NO.1 coil was 23,250 yuan/mt in Wuxi; the price for cold-rolled 430/2B coil was 7,600 yuan/mt in both Wuxi and Foshan.
This week, the main theme of stainless steel trading quickly shifted from "weak reality" to "expectations trading." Rumors of tighter Indonesian nickel ore approvals first ignited bullish sentiment among financial funds, leading to a joint rally in SS and SHFE nickel, which had been hovering at low levels. Futures discounts narrowed rapidly, forcing spot stainless steel prices to follow higher. Although year-end demand was seasonally low, stainless steel social inventory destocking accelerated, down 3.7% WoW to 892,400 mt, driven by expectations of supply-demand contraction due to news of production cuts at steel mills, recent price surges stimulating a "rush to buy amid continuous price rise and hold back amid price downturn" mentality, and increased export demand to capitalize on the window period following adjustments to China's export policies (re-inclusion of stainless steel products within the export licensing management scope). On the cost side, influenced by nickel ore news and recent replenishment by some traders and small-to-medium steel mills, high-grade NPI prices stopped falling and strengthened; the decline in high-carbon ferrochrome prices was limited, providing stronger cost support for stainless steel. Overall, however, the recent strength in the stainless steel market relied heavily on strong news-driven support, with the impact of the year-end off-season still present. Although prices saw some short-term rises driven by news stimuli, cost support, and expectations for mill production cuts, there remains a risk of a pullback.
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