[SMM Stainless Steel Daily Review] SS Futures Strengthen Again and Test Higher, Stainless Steel Spot Prices Follow the Rise, Inquiries and Transactions Show Some Recovery

SMM February 4 news, SS futures continued to rise sharply. Macro sentiment improved marginally, with precious metals stopping their decline and rebounding today, and the non-ferrous metals sector also strengthened. Driven by this, SS futures also rose, reaching a high of 13,870 yuan/mt. In the spot market, driven by the strong upward trend of SS futures, stainless steel spot prices also increased; although it is close to the Chinese New Year holiday and overall trading was sluggish, under the boost of recent continuous price increases in stainless steel, market inquiry activity has somewhat recovered, and some pre-holiday restocking orders have increased compared to earlier.

The most-traded SS futures contract strengthened and rose. At 10:30 am, SS2603 was quoted at 13,860 yuan/mt, up 280 yuan/mt from the previous trading day. The spot premiums/discounts for 304/2B in Wuxi were in the range of 310-510 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 14,100 yuan/mt, Foshan average price 14,050 yuan/mt; Wuxi cold-rolled 316L/2B coils 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 rises, bulls are taking profits, leading to a lack of upward momentum in the stainless steel futures market, which is now in the doldrums. The signs of capital withdrawal are evident, further limiting the upside room. As a result, although stainless steel spot prices remain high, the upward momentum is hindered, and market sentiment has shifted from cautious to more conservative. The fundamental support in the spot market is weak, and the overall market before the holiday is sluggish, with the characteristic of "high prices, low transactions" being particularly prominent. With the approaching Chinese New Year holiday, pre-holiday stockpiling by downstream end-users has largely concluded, and given the current high spot prices, there is a strong fear of high prices, leading to persistently weak purchasing intentions and low actual market transactions. Most spot traders plan to take holidays before the first week of February, further weakening market trading activity. This week, social inventory of stainless steel showed a slight recovery, but it remains at historically low levels. The main entities taking delivery are mainly futures and spot institutions, with a low proportion of actual purchases by end-users, resulting in a large amount of goods remaining in the circulation stage and not truly entering the end-use consumption area. The support from end-use demand for the market is seriously insufficient, further intensifying market bargaining emotions. 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 drop significantly. However, the downstream end-use industry will also enter the holiday period, leading to a temporary halt in demand. The benefits of reduced supply are completely offset by the contraction in demand, making it difficult to provide effective support for market prices in the short term, and the overall impact is 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.