[SMM Stainless Steel Daily Review] Sluggish Upward Momentum for SS, Sluggish Spot Stainless Steel Transactions at Year-End Off-Season

SMM December 29, SS futures were in the doldrums. SHFE nickel futures showed limited upward momentum, and SS futures weakened in tandem. Although prices briefly climbed above 13,000 yuan/mt before noon, they pulled back again in the afternoon, closing at 12,910 yuan/mt. Spot market, the momentum for further rises in SS futures has slowed down. Spot prices have already increased from previous levels, but against the backdrop of year-end off-season demand, downstream demand remained sluggish, and there was a lack of further stimulus from news. Spot prices overall held steady. Market participants are awaiting further developments regarding stainless steel mill production cuts and downstream winter stockpiling.

The most-traded SS futures contract was in the doldrums. At 10:30 AM, the SS2602 contract was quoted at 12,975 yuan/mt, up 50 yuan/mt from the previous trading day. In Wuxi, the spot premiums/discounts for 304/2B were in the range of 145-395 yuan/mt. In the spot market, the average price for cold-rolled 201/2B coil in Wuxi was 8,200 yuan/mt. The average price for cold-rolled trimmed 304/2B coil was 13,075 yuan/mt in Wuxi and 13,075 yuan/mt in Foshan. In Wuxi, the price for cold-rolled 316L/2B coil was 24,150 yuan/mt, and in Foshan it was 24,150 yuan/mt. The price for hot-rolled 316L/NO.1 coil in Wuxi was 23,250 yuan/mt. The price for cold-rolled 430/2B coil was 7,600 yuan/mt in both Wuxi and Foshan.

This week, the main trading theme for stainless steel quickly shifted from "weak reality" to "expectations trading." Rumors of tightened approvals for Indonesian nickel ore first ignited bullish sentiment among financial funds, leading to a coordinated rally in the persistently low SS and SHFE nickel futures. Futures discounts narrowed rapidly, forcing spot stainless steel prices to follow the rise. Although year-end demand was at a seasonally low level, 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 stainless steel mill production cuts, recent price surges stimulating a "rush to buy amid continuous price rise and hold back amid price downturn" mentality, and increased demand to export within a window period spurred by adjustments to domestic export policies (re-inclusion of stainless steel products within the export licensing management scope). Cost side, affected 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 support from news. The impact of the year-end demand off-season persists. Although prices rose in the short term driven by news stimulus, cost support, and expectations for production cuts, the market still faces some risk of a pullback.