[SMM Stainless Steel Daily Review] SS Futures Test Highs Since April, Sentiment in Stainless Steel Spot Market Strengthens with Higher Offers

SMM January 7th report, SS futures surged and hit the daily upper limit. Today, under the influence of geopolitical conflicts, the overall metal futures strengthened significantly, with SHFE nickel hitting the daily upper limit, driving SS futures to continue strengthening and also hitting the daily upper limit by the close, breaking through the 14,000 yuan/mt level, setting a new high since 2025. In the spot market, driven by the rapid rise in futures, spot quotations increased substantially, with 304 cold-rolled prices generally rising by 600 yuan/mt before noon; after SS futures hit the daily upper limit in the afternoon, spot quotations further increased, and major trader agents suspended their quotations. Due to the rapid and significant price increase, downstream end-users became more cautious, resulting in limited actual transactions during the day, but in the context of a stronger market sentiment, low-price concessions have virtually disappeared.

The most-traded SS futures contract hit the daily upper limit. At 10:30 am, SS2602 was quoted at 138,700 yuan/mt, up 550 yuan/mt from the previous trading day. The spot premiums/discounts for 304/2B in Wuxi were in the range of 100-300 yuan/mt. In the spot market, Wuxi 201/2B cold-rolled coils were quoted at 8,300 yuan/mt; 304/2B cold-rolled coils with trimmed edges averaged 13,900 yuan/mt in Wuxi and 13,900 yuan/mt in Foshan; 316L/2B cold-rolled coils were quoted at 25,650 yuan/mt in Wuxi and 245,650 yuan/mt in Foshan; 316L/NO.1 hot-rolled coils were quoted at 24,600 yuan/mt in Wuxi; 430/2B cold-rolled coils in both Wuxi and Foshan were quoted at 7,650 yuan/mt.

Driven by news related to Indonesian nickel mines, stainless steel futures ended their previous weakening trend, with SHFE nickel and SS futures surging. In the spot market, despite being in the traditional consumption off-season at year-end, with relatively weak end-use demand, spot quotations rose in tandem with the strengthening futures. Although downstream buyers still found it difficult to accept high-priced goods, recent overall transaction volumes were moderate under slight discounts offered by traders. Recently, destocking of stainless steel social inventory has been noticeable, with total social inventory dropping to 892,400 mt as of December 25th. The recent price increases have restored profitability for stainless steel mills in terms of raw material inventory costs. Additionally, continuous production cuts and inventory reductions have reduced the pressure on mills to sell, increasing their willingness to produce, and production in January is expected to increase slightly. Furthermore, stainless steel products have been re-included in the export license management scope, with a "one batch, one certificate" policy, and the license validity period is 3 months. Future exports may be restricted, and recently, under the influence of an export rush, the number of orders has increased, which will likely deplete January's export demand. Cost side, ferrochrome prices continued to climb due to the impact of nickel mine news and tight supply expectations; high-carbon ferrochrome prices saw a relatively small decline; stainless steel scrap prices rose in line with stainless steel spot and ferrochrome. Stainless steel costs continue to show an upward trend, with cost support strengthening. Currently, the stainless steel market exhibits a pattern where futures drive spot cargo. The year-end off-season consumption situation has not shown significant improvement. Recent price increases have been largely influenced by market news, with the futures market experiencing a strong rebound and rally. Coupled with robust cost support and continuously declining inventory, stainless steel spot prices have followed suit and risen. However, there remains a certain risk of pullback in the market.