[SMM Stainless Steel Daily Review] SS Futures Hold Up Well, Spot Stainless Steel Trading Sluggish

SMM reported on January 23 that SS futures continued to hold up well. Although the night session showed weaker performance, prices gradually climbed after the daytime session opened, with the high point once reaching 14,880 yuan/mt. In the spot market, the strong futures performance supported spot prices; however, downstream end-users showed strong fear of high prices, resulting in sluggish inquiries and transactions. Driven by pre-holiday shipment and capital return needs, traders offered slight discounts to facilitate sales, leading to a slight pullback in quotations. In the short term, the strength in futures still provides some support to the spot market, but weak end-use demand limits upside room for prices. Before the holiday, the market is likely to maintain a pattern of "strong futures, weak spot, and mediocre transactions."

The most-traded SS futures contract held up well. At 10:30 a.m., the SS2603 contract was quoted at 14,590 yuan/mt, up 225 yuan/mt from the previous trading day. In Wuxi, spot premiums/discounts for 304/2B were in the range of 80-180 yuan/mt. In the spot market, the average price for cold-rolled 201/2B coil in Wuxi was 8,500 yuan/mt; for cold-rolled mill-edge 304/2B coil, the average price in Wuxi was 14,550 yuan/mt, while in Foshan it was 14,450 yuan/mt; for cold-rolled 316L/2B coil in Wuxi, the price was 26,500 yuan/mt, and in Foshan it was also 26,500 yuan/mt; for hot-rolled 316L/NO.1 coil in Wuxi, the price was 25,600 yuan/mt; for cold-rolled 430/2B coil, both Wuxi and Foshan reported 7,800 yuan/mt.

This week, driven by capital flows, market bullish sentiment continued to heat up. Coupled with low social inventory of stainless steel and limited arrivals at steel mills, some futures-spot arbitrage institutions faced restrictions on picking up goods from previous orders, making it difficult to deliver short positions on time, which further pushed futures prices to stage highs. Under the resonance of multiple factors, stainless steel futures continued to break upward, setting a new high since June 2024, directly driving SS stainless steel spot prices to climb in sync. Although the strong performance of futures broke the previous wait-and-see atmosphere in the market and injected strong emotional support into the spot market, the current supply-demand contradiction has not been effectively alleviated, and market trends show distinct structural characteristics. As stainless steel spot prices continued to test highs following the futures surge, downstream end-customers' fear of high prices significantly increased, purchasing attitudes became more cautious, and substantive market transactions remained sluggish. From the transaction structure, this week's market transactions were mainly concentrated in futures-spot institutions purchasing spot cargo and arbitraging on futures, with supplies mostly accumulating in circulation channels rather than truly flowing into end-use consumption, resulting in severely insufficient support from end-use demand. However, recent limited arrivals at stainless steel mills, coupled with current inventory—though showing a slight buildup—remaining at low levels, kept overall spot supply tight. Relying on strong futures and tight supply conditions, traders showed strong willingness to hold prices firm, with relatively few operations involving price concessions for sales, which also supported stainless steel spot prices in maintaining a strong performance. The strong performance on the cost side has further solidified the support below prices: high-grade NPI prices remain on an upward trajectory, driven continuously by expectations of nickel ore tightness; high-carbon ferrochrome prices hold steady at highs; stainless steel scrap prices follow the rise in stainless steel finished products. However, as stainless steel prices increase, steel mill smelting profits have been effectively restored. Overall, this week's stainless steel market trends are still primarily driven by strong futures and market sentiment. Although the spot fundamentals are supported by two major positives—"low inventory and strong costs"—and the restoration of steel mill profits has further improved supply-side expectations, real end-use demand has not yet shown substantial improvement, and the issue of goods accumulation in the circulation chain remains unresolved. In the short term, the market may continue to hold up well, but the risk of contention triggered by weak end-use demand has gradually intensified.