[SMM Stainless Steel Daily Review] Appointment of New US Fed Chair Sparked Policy Concerns, Stainless Steel Futures and Spot Prices Declined in Tandem

SMM, May 14: SS futures showed a trend of fluctuating downward and gradually pulling back. Kevin Warsh was confirmed as the new US Fed Chair. Affected by market concerns over the tightening of US Fed monetary policy, non-ferrous metal futures generally weakened and dipped today, with SS declining in tandem. As of the midday close, the most-traded SS contract was quoted at 14,870 yuan/mt. Spot market side, dragged down by the sharp decline in SS futures, coupled with the impact of mainstream stainless steel mills lowering guidance prices by 200 yuan/mt this morning, spot stainless steel prices followed suit and moved lower. However, the price pullback failed to effectively boost demand, as downstream traders mostly adopted a cautious wait-and-see stance, and the stimulating effect of price cuts on transactions remained limited.

The most-traded SS futures contract pulled back. At 10:15 AM, SS2605 was quoted at 14,950 yuan/mt, down 260 yuan/mt from the previous trading day. Spot premiums for 304/2B in the Wuxi area were in the range of 470-670 yuan/mt. In the spot market, the average price of cold-rolled 201/2B coils in Wuxi remained flat; for cold-rolled untrimmed 304/2B coils, the Wuxi average price fell by 50 yuan/mt while the Foshan average price held steady; cold-rolled 316L/2B coils in the Wuxi area rose by 25 yuan/mt; hot-rolled 316L/NO.1 coils saw Wuxi prices rise by 100 yuan/mt; cold-rolled 430/2B coils in both Wuxi and Foshan held steady.

The current stainless steel market was driven by wild swings in futures, with spot prices pulling back after surging. The short-term price increase exceeded expectations and had limited correlation with its own fundamentals, with insufficient downstream acceptance and transactions showing phased characteristics. This week was the first week after the Labour Day holiday. Earlier, the futures surge drove the market to rush to buy amid continuous price rise and hold back amid price downturn, and combined with restocking demand due to insufficient pre-holiday stockpiling and purchases by spot-futures arbitrage institutions, transactions warmed up on a phased basis. However, after futures pulled back, transactions returned to sluggish levels, as real demand did not match the price increase, and downstream purchasing remained cautious. Futures side, SS futures this week showed a trend of "rising first then pulling back, fluctuating at highs overall," with core drivers being Middle East geopolitical conflicts and shifts in industry chain expectations. After the holiday, the easing of Middle East conflicts drove non-ferrous metals collectively higher, with SS futures following the rally to 15,835 yuan/mt, hitting a new high since September 2023. Subsequently, expectations of the Strait of Hormuz reopening eased sulfur shortage concerns, and SHFE nickel's decline dragged SS lower, but overall prices remained at highs, with price fluctuations mainly relying on news-driven factors and weak fundamental support. Supply and inventory side, steel mills enjoyed good profitability and strong production willingness, with production schedules staying high. The estimated production schedule for May remained elevated, and supply pressure persisted. This week saw concentrated arrivals from steel mills, easing the earlier shortage of certain specifications. Combined with sluggish transactions after the futures pullback, arrivals exceeded trading volume, pushing social inventory to end continuous destocking and rebound to 955,200 mt. Meanwhile, futures-spot institutions held relatively large positions, and the risk of selling pressure from hidden inventory should not be overlooked.

Cost side, driven by the strengthening of SHFE nickel and SS futures, high-grade NPI quotes continued to rise, with reduced supply of high-grade NPI intensifying tightness; stainless steel scrap prices rose in tandem, moving in line with finished product prices. As the increase in finished product prices covered the rise in raw material costs, steel mill profits remained at a favorable level, further reinforcing the willingness to maintain high production schedules and providing support for subsequent supply expansion. Overall, rising costs and low inventory levels provided market support, and market confidence was sufficient; however, price increases mainly relied on news-driven factors, with downstream caution and weak real demand. Additionally, steel mills maintained high production schedules, supply remained ample, and the traditional consumption off-season was approaching, while futures-spot institutions held relatively large positions with significant selling pressure. In comprehensive assessment, if futures fluctuate, prices may face potential pullbacks. Going forward, attention should be paid to the Middle East situation, futures trends, downstream demand, and steel mill production schedules.