[SMM Stainless Steel Daily Review] Stainless Steel Futures in the Doldrums, Spot Market Still Shows Willingness to Hold Prices Firm

SMM January 27 report, SS futures were in the doldrums. Today, nonferrous futures generally weakened, with SS also pulling back, hitting a low of 14,415 yuan/mt. In the spot market, influenced by the weakening futures, traders slightly lowered their quotes, but market sentiment did not show significant easing, maintaining a relatively strong pattern. Currently, stainless steel social inventory is at a low level, with limited tradable volumes for traders and smaller sales pressure; as the Chinese New Year holiday approaches, there is still some release of rigid demand for purchasing, and it is expected that before the holiday, stainless steel spot market prices will mainly follow the fluctuations of the futures.

The most-traded SS futures contract retreated after a rapid rise. At 10:30 am, SS2603 was quoted at 14,510 yuan/mt, down 300 yuan/mt from the previous trading day. In Wuxi, the spot premiums and discounts for 304/2B were in the range of 110-210 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, Wuxi average price 14,500 yuan/mt, Foshan average price 14,450 yuan/mt; Wuxi cold-rolled 316L/2B coils 26,650 yuan/mt, Foshan 26,650 yuan/mt; hot-rolled 316L/NO.1 coils, Wuxi 25,800 yuan/mt; both Wuxi and Foshan cold-rolled 430/2B coils were 7,800 yuan/mt.

This week, driven by capital, market bullish sentiment continued to heat up; coupled with recent low stainless steel social inventory and limited arrivals from steel mills, some futures-spot institutions faced restrictions on picking up goods for earlier orders, making it difficult to deliver short positions on time, further boosting a phased rise in futures prices. Under the resonance of multiple factors, stainless steel futures continuously rose, breaking new highs since June 2024, directly driving up SS stainless steel spot prices. Although the strong performance of the futures broke the previous market's wait-and-see atmosphere, injecting strong sentiment support into the spot market, the supply-demand contradiction has not been effectively alleviated, and the market operation shows a distinct structural feature. As stainless steel spot prices continue to probe higher following the futures, downstream end-users' fear of high prices significantly increased, leading to more cautious purchasing, and the market's substantive transactions remained weak. Observing the transaction structure, this week's market transactions mainly concentrated on futures-spot institutions buying spot and hedging on the futures, with goods mostly accumulating in the circulation stage and not truly flowing into the end-use consumption area, resulting in severe inadequacy of terminal demand support for the market. However, with limited recent arrivals from stainless steel mills and current inventory, although slightly building up, still at a low level, the overall tradeable goods are tight. Traders, relying on the strong futures and scarce goods, have a strong intention to hold prices firm, with fewer operations of selling at lower prices, which also supports the stainless steel spot prices to hold up well. The strong performance on the cost side further solidifies the price support below: high-grade NPI prices remain on an upward trajectory, driven by persistent expectations of nickel ore shortages; 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 trend was still 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, the real 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 intensified.