[SMM Stainless Steel Daily Review] SHFE Nickel Drives SS Futures to Stop Declining and Strengthen, Stainless Steel Market Faces Hidden Concerns of Pullback

SMM January 9th, SS futures showed a trend of bottoming out and strengthening. SHFE nickel's renewed strength boosted the stainless steel futures, with SS again strengthening and reaching a high of 13,885 yuan/mt. In the spot market, influenced by the "rush to buy amid continuous price rise and hold back amid price downturn" sentiment, inquiries and transactions in the stainless steel market were quite active during the week. However, as stainless steel prices continued to surge, downstream end-users' fear of high prices gradually increased, coupled with expectations for a slowdown in the tightening of Indonesian nickel ore approvals, leading to significant fluctuations in the futures. Additionally, it is still the traditional consumption off-season, and stainless steel mills are expected to increase production in January, posing a substantial risk of a pullback in the market. This week, social inventory decreased 2.06% WoW to 854,600 mt.

The most-traded SS futures contract pulled back. At 10:30 AM, SS2602 was quoted at 13,795 yuan/mt, down 45 yuan/mt from the previous trading day. In Wuxi, the spot premiums and discounts for 304/2B ranged between 75-275 yuan/mt. In the spot market, Wuxi cold-rolled 201/2B coils were quoted at 8,400 yuan/mt; cold-rolled 304/2B coils, with an average price of 13,800 yuan/mt in Wuxi and 13,800 yuan/mt in Foshan; Wuxi cold-rolled 316L/2B coils at 25,850 yuan/mt, and Foshan at 25,850 yuan/mt; hot-rolled 316L/NO.1 coils in Wuxi at 24,550 yuan/mt; and both Wuxi and Foshan cold-rolled 430/2B coils at 7,650 yuan/mt.

Recently, SHFE nickel futures prices surged significantly, driving the SS stainless steel futures to strengthen in tandem. The SS futures even hit the daily limit up, setting a new high since 2025. Despite the ongoing traditional consumption off-season for stainless steel, the continuous rise in futures prices broke the previously pessimistic market sentiment, causing stainless steel spot prices to follow the upward trend, with traders continuously raising their quotes. Downstream buyers, influenced by the "rush to buy amid continuous price rise and hold back amid price downturn" mentality, and due to low inventories from cautious purchasing earlier, have seen a notable increase in inquiries and transaction activity. Additionally, total stainless steel production in December dropped to 3.23 million mt, indicating a supply contraction. Coupled with the previous lack of willingness among traders to purchase, stainless steel social inventory has been continuously declining, hitting a new low for the year. Although stainless steel production in January has rebounded, the increase is mainly concentrated in 200-series and 400-series products, while 300-series production has further declined. With high-grade NPI prices remaining strong, 304 stainless steel prices are expected to stay firm in the short term. Despite a slight inversion in spot raw material prices, there is still good profit margin in inventory raw materials. With rising nickel iron prices, steady ferrochrome prices, and the clear economic advantage of stainless steel scrap, its price will continue to follow the rise in finished products. Overall, the continuous rise in costs provides some support to stainless steel prices. However, the core driver of current stainless steel spot prices remains the spillover effect from the futures market. Although the supply-demand imbalance in the spot market has somewhat eased, the fundamental issue of insufficient real demand from end-users during the off-season has not been fundamentally resolved, posing a significant risk of a pullback in prices.