[SMM Stainless Steel Daily Review] News-Driven SS Futures Retreat After Rapid Rise, Stainless Steel Spot Purchase Sluggish Ahead of Holiday

SMM January 26 report, SS futures retreated after rapid rise. Affected by the nickel ore ship accident, market expectations of a tight nickel ore supply intensified. After the daytime session opened, SS futures strengthened with fluctuations, reaching a high of 14,955 yuan/mt, but then gradually pulled back, closing at 14,645 yuan/mt. In the spot market, driven by news in the morning, SS futures strengthened and traders raised their quotes, but actual transactions were not ideal. Downstream end-users showed a clear fear of high prices, and just-in-time procurement was the main activity as the Chinese New Year holiday approached.

The most-traded SS futures contract retreated after rapid rise. At 10:30 am, SS2603 was quoted at 14,810 yuan/mt, up 55 yuan/mt from the previous trading day. In Wuxi, 304/2B spot premiums and discounts ranged from -140 to -40 yuan/mt. In the spot market, Wuxi cold-rolled 201/2B coils were all quoted at 8,500 yuan/mt; cold-rolled 304/2B coils, with an average price of 14,550 yuan/mt in Wuxi and 14,450 yuan/mt in Foshan; cold-rolled 316L/2B coils, both in Wuxi and Foshan, were 26,600 yuan/mt; hot-rolled 316L/NO.1 coils in Wuxi were 25,800 yuan/mt; and cold-rolled 430/2B coils in both Wuxi and Foshan were 7,800 yuan/mt.

This week, driven by capital, market bullish sentiment continued to heat up. Coupled with low stainless steel social inventory and limited arrivals at steel mills, some futures-spot institutions faced difficulties in picking up goods for earlier orders, making it hard to deliver short positions on time, further boosting a temporary surge in futures prices. Under the combined influence of multiple factors, stainless steel futures broke through continuously, hitting new highs since June 2024, directly driving up SS stainless steel spot prices. Although the strong performance of the futures market broke the previous wait-and-see atmosphere and injected strong sentiment support into the spot market, the contradiction between supply and demand has not been effectively alleviated, and the market operation shows distinct structural characteristics. As stainless steel spot prices continued to rise with the futures, downstream end-users' fear of high prices significantly increased, leading to cautious purchasing attitudes and weak substantive transactions. Observing the transaction structure, this week's market transactions mainly concentrated on futures-spot institutions buying spot goods and hedging in the futures market, with goods mostly accumulating in the circulation stage and not truly flowing into the end-use consumption sector, resulting in insufficient support from end-use demand. However, with limited recent arrivals at stainless steel mills and a slight inventory buildup still at a low level, overall trade supplies remained tight. Traders, relying on the strong futures and tight supply, had a strong intention to hold prices firm, with fewer operations of selling at lower prices for profit, which also supported the relatively strong operation of stainless steel spot prices. The robust cost side further solidified the price floor: under the continuous drive of expected tight nickel ore supply, high-grade NPI prices remained in an upward trend; high-carbon ferrochrome prices held steady at high levels; and stainless steel scrap prices rose in tandem with finished stainless steel products. However, as stainless steel prices increased, steel mill smelting profits have been effectively restored. Overall, this week, the stainless steel market was still primarily driven by strong futures and market sentiment. Although the spot fundamentals were supported by two major positives—low inventory and strong costs—and steel mill profits recovery further improved supply-side expectations, the actual end-use demand has not 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 increased.