[SMM Stainless Steel Daily Review] SHFE Nickel Weakened + Pre-Holiday Demand Sluggish, Stainless Steel Futures and Spot Both Fell with Sluggish Trading

SHFE nickel weakness + sluggish pre-holiday demand, stainless steel futures and spot prices both fall with sluggish trading

SMM January 28 reported that SS futures continued to be in the doldrums. Affected by the continuous decline of SHFE nickel, SS also fell, with the intraday low further dropping to 14,260 yuan/mt. In the spot market, influenced by the consecutive weakness of SS futures, spot quotations pulled back; as the Chinese New Year holiday approached, there was no significant release of pre-holiday stockpiling demand, leading to generally sluggish trading during the day. Despite frequent reports in recent days about stainless steel mill maintenance and production cuts in February, the current high stainless steel prices have dampened market confidence for further increases. Coupled with the limited trading days in February due to the Chinese New Year holiday, the overall market maintained a relatively stable operating trend.

The most-traded SS futures contract remained in the doldrums. At 10:30 AM, SS2603 was quoted at 14,330 yuan/mt, down 180 yuan/mt from the previous trading day. The spot premiums/discounts for 304/2B in Wuxi ranged between 190-390 yuan/mt. In the spot market, Wuxi cold-rolled 201/2B coils were all quoted at 8,500 yuan/mt; the average price of cold-rolled 304/2B coils with trimmed edges in Wuxi was 14,400 yuan/mt, and in Foshan, it was 14,350 yuan/mt; the price of cold-rolled 316L/2B coils in Wuxi and Foshan was 26,650 yuan/mt; the price of hot-rolled 316L/NO.1 coils in Wuxi was 25,800 yuan/mt; the price of cold-rolled 430/2B coils in both Wuxi and Foshan was 7,800 yuan/mt.

This week, driven by capital, the market's bullish sentiment continued to heat up; coupled with the low social inventory of stainless steel and limited arrivals at steel mills, some futures and spot institutions faced restrictions on picking up goods for their previous orders, making it difficult to deliver short positions on time, which further boosted the futures prices. Under the combined influence of multiple factors, SS futures prices continuously rose, hitting new highs since June 2024, directly driving up the spot prices of SS stainless steel. 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 supply-demand contradiction has not been effectively alleviated, and the market operation showed distinct structural characteristics. As the spot prices of stainless steel followed the futures' rise, downstream end-users' fear of high prices significantly increased, leading to more cautious purchasing attitudes and persistently weak substantive transactions. Observing the transaction structure, this week's market transactions mainly concentrated on the operations of futures and spot institutions buying spot goods and hedging on the futures market, with goods mostly accumulating in the circulation sector and not truly flowing into the end-use consumption area, resulting in insufficient support from terminal demand. However, with limited arrivals at steel mills recently and the current inventory, although slightly building up, still at a low level, the overall trade supply is tight. Traders, relying on the strong futures and tight supply, are strongly holding prices firm, with fewer operations of selling at lower prices, which also supports the spot prices of stainless steel to hold up well. The strong performance on the cost side further solidifies support below prices: high-grade NPI remains on an upward trajectory driven by persistent expectations of nickel ore tightness; high-carbon ferrochrome prices hold steady at highs; stainless steel scrap prices follow the rise in stainless steel products. However, as stainless steel prices increase, steel mill profits have effectively recovered. Overall, this week's stainless steel market dynamics continue to be dominated by strong futures and market sentiment. While spot fundamentals are supported by two major positives—low inventory and strong costs—and the recovery in steel mill profits further improves supply-side expectations, real end-use demand has not yet shown substantial improvement, and the issue of goods accumulation in circulation remains unresolved. In the short term, the market may maintain a relatively strong pattern, but the risk of contention triggered by weak end-use demand is gradually intensifying.