[SMM Analysis] Export Front-Loading Drives Inventory Reduction, Spot-Futures Divergence Limits Upside Room [SMM Stainless Steel Futures Weekly Review]

SMM data showed that the most-traded stainless steel futures contract (SS2602) continued its rebound this week (December 22-26, 2025), with its price center moving significantly higher. As of 10:30 on December 26, the contract was quoted at 12,925 yuan/mt, up 245 yuan/mt (+1.93%) from last Friday's closing price of 12,680 yuan/mt. The upward momentum this week was primarily driven by policy expectation disruptions on the supply side and a concentrated release of export demand. Expectations for tighter approval of Indonesian nickel ore RKAB continued to intensify, coupled with an "installation rush" effect ahead of the implementation of the year-end export license management system, which boosted futures sentiment. Mid-week (December 24), futures once broke strongly through the 13,000 yuan/mt psychological barrier, hitting a high of 13,100 yuan/mt. However, as prices surged, the spot market struggled to catch up, revealing a structural contradiction of "strong expectations, weak reality," and futures subsequently pulled back under pressure, fluctuating below 13,000.

Macro perspective, the external environment was complex and volatile this week, with policy uncertainty and exchange rate fluctuations becoming focal points. The transition of the US Fed Chairman, combined with a lack of data, heightened policy uncertainty, keeping the US dollar index under pressure. Notably, the offshore renminbi (CNH) recently broke strongly through the 7.0 level, reaching a multi-month high. Against the backdrop of high reliance on stainless steel exports, the rapid appreciation of the currency could squeeze export order profits in the short term, necessitating vigilance against the marginal weakening effect of foreign exchange settlement risks on subsequent export momentum, posing a potential profit headwind to the export rush currently in full swing.

Fundamentals, the core variable this week was the unexpected destocking of social inventory. The latest SMM data showed social inventory dropped to 892,400 mt this week, down 3.7% WoW from 926,700 mt. This destocking was mainly attributed to the "front-loaded release" of export demand: due to the stainless steel product export license management effective January 1, 2026, export enterprises concentrated on cargo pick-up and customs declaration, accelerating the turnover of visible inventory. Although the rise in futures stimulated some speculative demand, it is important to note that this round of destocking relied more on short-term export boosts during the policy window rather than a substantial recovery in domestic end-user demand, and the sustainability of demand remains to be seen.

Spot transactions, the market exhibited a coexistence of spot prices struggling to keep up with gains and weak transaction volumes. Early in the week, driven by the rapid surge in futures, traders raised their offers, but the increases failed to match the futures gains. Although offers for 304 cold-rolled spot remained firm, downstream end-users had limited acceptance of the sharp short-term price increases, strictly maintaining just-needed procurement strategies and adopting a cautious wait-and-see attitude towards high-premium supplies. High-priced resources saw liquidity contraction, with actual market transactions mainly concentrated on discounted low-priced resources. As futures pulled back, the logic of spot-futures convergence strengthened.

Cost side, raw material costs shifted significantly upward, strengthening support logic. As of December 26, high-grade NPI offers broke through the 900 threshold to 904 yuan/mtu, rising sharply WoW, effectively lifting the marginal cost support for stainless steel; high-carbon ferrochrome offers edged up to 8,100 yuan/mt (50% metal content). The firmness of raw material prices provided strong bottom support for the futures pullback, partially offsetting the downward pressure from weak spot transactions.

Overall assessment, this week’s market performance reflected a valuation recovery driven by the resonance of front-loaded export demand and rising costs. Accelerated inventory drawdowns provided fundamental support for futures, but weak high-level spot transactions and concerns over export margins due to currency appreciation limited further upside room. Looking ahead to next week, as the export policy window approaches closure and the New Year holiday nears, market participants' willingness to trade may weaken. Key focus will be on whether the high spot premium can be corrected through a futures pullback or spot catch-up gains. Futures are expected to fluctuate at highs, with caution against a retreat after rapid rise.