[SMM Stainless Steel Daily Review] SS Futures Halt Decline and Fluctuate, Stainless Steel Spot Market Remains Sluggish Ahead of Holiday

SMM February 3 report, SS futures showed a steady and range-bound trend. Yesterday, SS futures plummeted, hitting the daily limit down, allowing market pessimism to be released; today, nonferrous metals generally stopped falling and stabilized, with SS also recovering, reaching an intraday high of 13,650 yuan/mt. In the spot market, influenced by the pullback in futures, spot quotations were further reduced, but market pessimism was limited: most traders had already prepared for the holiday, and downstream buyers had largely completed their pre-holiday stockpiling, resulting in very few actual transactions; spot quotations mainly followed the changes in the futures, and traders are looking forward to the demand recovery after the holiday during the "golden March and silver April" period.

The most-traded SS futures contract showed a steady and range-bound trend. At 10:30 am, SS2603 was quoted at 13,580 yuan/mt, down 280 yuan/mt from the previous trading day. In Wuxi, the spot premiums/discounts for 304/2B stainless steel ranged between 490 and 690 yuan/mt. In the spot market, Wuxi cold-rolled 201/2B coils were quoted at 8,500 yuan/mt; cold-rolled 304/2B coils with trimmed edges, Wuxi average price was 14,000 yuan/mt, Foshan average price was 14,050 yuan/mt; Wuxi cold-rolled 316L/2B coils were 26,600 yuan/mt, Foshan 26,600 yuan/mt; hot-rolled 316L/NO.1 coils, Wuxi 25,750 yuan/mt; both Wuxi and Foshan cold-rolled 430/2B coils were 7,800 yuan/mt.

As the Chinese New Year holiday approaches and risk aversion sentiment among investors increases, bulls have been taking profits, leading to a lack of upward momentum in the stainless steel futures, which overall exhibited a weak and range-bound pattern. The signs of capital withdrawal were evident, further limiting the upside room. Affected by this, although stainless steel spot prices remained high, the upward momentum was hindered, and market sentiment shifted from cautious to more conservative. The fundamental support in the spot market was weak, and the pre-holiday market was sluggish, characterized by high prices and low transaction volumes. With the approaching Chinese New Year, downstream end-users have largely finished their pre-holiday stockpiling, and given the current high spot prices, there is a strong fear of high prices, leading to persistently weak purchasing intentions and low actual transactions. Most spot traders plan to take holidays before the first week of February, further reducing market activity. This week, social inventory of stainless steel saw a slight rebound, but it still remains at historically low levels. The main entities taking delivery were mostly futures-spot institutions, with a low proportion of actual end-user purchases, leaving a large amount of goods stranded in the circulation stage without truly entering the end-use consumption, severely lacking the support from end-use demand, and intensifying market speculation. On the supply side, the impact of the Chinese New Year holiday has already become apparent, and stainless steel production in February is expected to significantly decrease. However, the downstream end-use industry will also enter the holiday, leading to a temporary halt in demand. The benefit of reduced supply is completely offset by the contraction in demand, making it difficult to provide effective support to market prices in the short term, with the overall impact being relatively weak. Cost side, the overall trend showed a divergence. The rise in high-grade NPI slowed significantly this week, with stainless steel mills showing a weak willingness to purchase high-priced raw materials, leading to relatively light actual transactions; high-carbon ferrochrome, on the other hand, continued its upward trend, but the overall support for stainless steel prices had weakened, with the cost center only shifting slightly upward. Overall, the stainless steel market this week was mainly driven by the capital movements in futures, with the fundamental support from the spot market being relatively weak. With pre-holiday risk aversion, weak end-use demand, and transactions stagnating in the distribution channels, the market lacked core fundamental support, and short-term activity is expected to decline further, putting downward pressure on spot prices.