[SMM Stainless Steel Daily Review] Stainless steel futures stabilize, spot trades warm up.

SMM reported on June 12 that SS futures showed signs of stopping falling and stabilizing. News of de-escalation in the US-Iran conflict emerged again, and non-ferrous metals futures generally saw a recovery rally. SS futures strengthened in tandem, and by the midday close, the most-traded SS contract was quoted at 14,715 yuan/mt. In the spot market, driven by the strengthening of SS futures, market activity picked up somewhat. Both inquiries and transactions recovered in the morning, and traders raised their offers.

The most-traded SS futures contract declined and pulled back. At 10:15 am, SS2607 was reported at 14,705 yuan/mt, up 300 yuan/mt from the previous trading day. In Wuxi, spot premiums for 304/2B were in the range of 365-915 yuan/mt. In the spot market, for cold-rolled 201/2B coils in Wuxi, the average price remained flat; for cold-rolled 304/2B coils with raw edges, the average price rose 50 yuan/mt in Wuxi and 50 yuan/mt in Foshan; for cold-rolled 316L/2B coils in Wuxi, the price fell 200 yuan/mt; for hot-rolled 316L/NO.1 coils in Wuxi, offers held steady; and for cold-rolled 430/2B coils in both Wuxi and Foshan, prices were stable.

This week, stainless steel futures and spot both came under pressure and moved lower, with macro headwinds outside China dominating the market and bearish sentiment spreading rapidly during the off-season. Industry expectations for the near term weakened, end-users were in a wait-and-see mode, rigid demand remained sluggish, and traders concentrated on selling at discounts to destock and clear inventory. Futures side, this week, overseas macro factors became the core driver of the market. US non-farm payrolls data significantly exceeded expectations, with the unemployment rate staying low, leading the market to postpone or even cancel expectations for US Fed interest rate cuts this year. The US dollar index strengthened to a nearly two-month high, putting broad pressure on the valuation of the non-ferrous metals sector. Dragged down by this, SS futures continued their one-sided decline, quickly falling below the previous support level of 14,500 yuan/mt, as bearish sentiment was concentrated released, further weakening sentiment across the entire industry chain. Spot and inventory side, this week, spot offers lagged significantly behind futures in declines, highlighting the divergence between futures and spot. The sharp decline in futures dragged down market sentiment, with traders' willingness to sell and destock increasing significantly, and low-priced goods continuing to emerge in the market. Currently in the traditional consumption off-season, downstream rigid demand was weak, buying interest was insufficient, and transactions were only slightly lifted by low-priced goods, with overall performance remaining sluggish. Supply side, this week, some steel mills gradually implemented production cuts and maintenance, resulting in marginal contraction of industry supply. Combined with traders actively clearing inventory, social inventory continued to destock, pulling back slightly, even though off-season demand was weak. Cost and profit side, this week, raw material prices for stainless steel were overall resistant to decline, diverging from the trend of finished steel. High-grade NPI saw limited declines, and prices of stainless steel scrap and high-carbon ferrochrome remained firm, providing strong bottom support from the raw material side. However, as spot prices continued to pull back, finished steel weakened while costs remained rigid, directly squeezing profit margins at steel mills. Profit calculations show that the current profit rate for steel mills, based on spot raw material costs, pulled back to around 1.9%, and dragged down by earlier high-cost inventory, the profit rate based on inventory raw material costs further dropped to 0.84%. Overall profitability narrowed significantly, which may increase steel mills' willingness to voluntarily cut production going forward. Overall, the pullback in futures this week drove sentiment bearish, and essential demand was weak in the off-season. Although steel mill maintenance and proactive destocking by traders led to a slight pullback in inventory, providing some support to spot cargo, it was difficult to reverse the overall weak trend. Raw material prices remained firm, holding up the bottom of spot cargo and limiting the room for deep declines. In the short term, the market will maintain a pattern of weak futures, resilient spot cargo, and sluggish trading. Going forward, focus will be on US Fed policy expectations, the movement of the US dollar index, the support strength of SS futures, the sustainability of downstream essential demand, and the implementation progress of steel mill maintenance.