[SMM Stainless Steel Daily Review] Year-End Funding Pressure Leads to Discounts on Spot Cargo, Stainless Steel Futures Provide Support for Short-Term Stability

SMM January 19 - SS futures held up well. Although the night session last Friday continued the weak trend, SS futures rose after Monday's opening. Despite the lack of further upward momentum, they fluctuated at highs around 14,300 yuan/mt. In the spot market, dragged by the weak performance of SS futures, spot traders' offers pulled back. In Foshan, due to expectations of an early Chinese New Year break, year-end repayment pressure, combined with strong wait-and-see sentiment and weak transactions among downstream end-users, more traders offered discounts for sales, with prices slightly lower than those in Wuxi. Although stainless steel demand remains weak and spot offers have pulled back slightly, spot cargoes available for circulation are still tight, and traders mainly dealing in spot cargoes face low inventory pressure. Coupled with cost support and high futures prices providing a floor, market sentiment to hold prices firm persists, and prices may remain firm in the short term.

The most-traded SS futures contract retreated after a rapid rise. At 10:30 a.m., the SS2603 contract was quoted at 14,360 yuan/mt, down 90 yuan/mt from the previous trading day. In Wuxi, spot premiums/discounts for 304/2B were in the range of 10-210 yuan/mt. In the spot market, the average price of cold-rolled 201/2B coil in Wuxi was 8,500 yuan/mt; the average price of cold-rolled trimmed 304/2B coil was 14,300 yuan/mt in Wuxi and 14,150 yuan/mt in Foshan; the price of cold-rolled 316L/2B coil was 26,300 yuan/mt in Wuxi and 26,300 yuan/mt in Foshan; the price of hot-rolled 316L/NO.1 coil was 25,500 yuan/mt in Wuxi; the price of cold-rolled 430/2B coil was 7,800 yuan/mt in both Wuxi and Foshan.

Recently, news from Indonesia's Ministry of Energy and Mineral Resources indicated that although the approved RKAB quota was adjusted from the previously rumored 250 million mt to 260 million mt, the approved volume for 2025 still narrowed significantly, and expectations of nickel ore supply tightness remain strong. SHFE nickel futures prices rose sharply, driving SS stainless steel futures to surge simultaneously. The most-traded contract once hit the limit-up, reaching a new high since June 2024, with strong market sentiment driven by funds. Although it is still the traditional consumption off-season for stainless steel, the strong performance of futures broke the previous cautious atmosphere in the market. Stainless steel spot prices followed the upward trend, and traders' offers climbed steadily. As stainless steel spot prices have risen to high levels, downstream end-users' fear of high prices intensified, with weak inquiries and purchases, and wait-and-see sentiment has not completely dissipated. However, limited arrivals during the week, combined with traders' previous lack of confidence leading to fewer purchases, plus their mentality to hold prices firm and reluctant to sell amid the rising trend, kept overall market supply tight, with few traders offering discounts for low-price sales. Cost side, support strengthened further: high-grade NPI prices surged driven by nickel ore news, high-carbon ferrochrome prices also rose supported by factors such as overseas chrome ore tariff policies, and stainless steel scrap prices followed the upward trend of finished products. The market trend continues to be primarily driven by macro expectations in the futures market and policy negotiations in Indonesia. Although the spot cargo fundamentals are supported by two major bullish factors—low inventory and strong costs—the actual demand from end-users has not yet shown substantial improvement. The market has currently entered a phase of "sentiment premium." In the short term, the market may hover at highs, but volatility risks have significantly increased.