[SMM Stainless Steel Daily Review] SS futures are in the doldrums amid news disturbance, off-season demand leads to weak stainless steel transactions.

According to SMM on June 26, SS futures showed an initial uptick before pulling back. Influenced by the Indonesian government's clarification on RKAB quota-related rumors, SS futures strengthened during the night session, attempting an upward break. However, dragged down by a decline in SHFE nickel in the morning, they continued the prior downtrend, drifting lower. As of the midday close, the most-traded SS contract settled at 14,585 yuan/mt. In the spot market, the morning strength in SS night session futures drove an improvement in market inquiries and trading activity, with quotes rising accordingly. However, futures subsequently weakened again, immediately heightening wait-and-see sentiment and causing trading activity to turn sluggish once more.

For the most-traded SS futures contract, at 10:15 AM, SS2608 was at 14,670 yuan/mt, up 70 yuan/mt from the previous trading day. Spot premiums for 304/2B in Wuxi were in the 400-900 yuan/mt range. In the spot market, the average price for cold-rolled 201/2B coil remained flat; for cold-rolled un-edged 304/2B coil, the average price fell 50 yuan/mt in Wuxi and remained flat in Foshan; the price of cold-rolled 316L/2B coil in Wuxi fell 50 yuan/mt; for hot-rolled 316L/NO.1 coil, quotes remained flat in Wuxi; and cold-rolled 430/2B coil prices remained flat in both Wuxi and Foshan.

This week, stainless steel futures and spot markets were in the doldrums, with macro headwinds outside China compounded by industry sentiment disruptions. Market pessimism intensified, and the off-season fundamentals became fully pronounced. The overall landscape was one of macro pressure weighing on futures, weakening off-season demand, traders cutting prices to reduce inventory, supply contractions supporting inventory levels, and shrinking steel mill profits. Futures were weighed down by monetary policy and raw material rumors, drifting lower. Spot prices maintained resilience, supported by steel mills holding prices firm, but end-user transactions were sluggish, keeping the overall market bearish. On the futures side this week, macro headwinds dominated the trend. Easing US-Iran conflict tensions modestly boosted risk appetite, but hawkish signals from the US Fed pushed up expectations for interest rate hikes, suppressing valuations across the non-ferrous metals sector. Mid-week, rumors of expanded Indonesian nickel ore quotas began circulating. Although later officially denied, market pessimism had already spread, leading capital to flee for safety and dragging SS futures into a sustained drift lower. Regarding spot prices and inventory, this week saw a clear divergence between futures and spot, with spot showing stronger resilience than futures. Mainstream steel mills maintained a strong willingness to hold prices firm, effectively establishing a price floor. However, as the market entered the traditional consumption off-season, end-user rigid demand continued to weaken. This, coupled with the decline in futures denting market confidence, fostered a strong wait-and-see sentiment among end-users, leading to sluggish transactions on the floor. Traders had a strong desire to reduce inventory, leading to frequent appearances of low-priced goods. Concurrently, steel mill maintenance and production cuts were implemented, marginally contracting supply and offsetting pressure from off-season demand. This week, overall social inventory remained stable without significant fluctuations. On the cost and profit side, this week saw a divergence between finished steel and raw material trends, with steel mill profits continuously narrowing. Stainless steel spot prices retreated alongside futures, with the price center shifting lower. However, the persistent tightness in high-grade NPI supply kept prices resistant to decline, with losses remaining limited, ensuring raw material costs remained rigid. Downward movement in finished steel products combined with firm costs directly squeezed smelting profits, further intensifying overall profit pressure on the industry. Overall, this week the market was dominated by macro headwinds, with weak off-season rigid demand serving as the core fundamental drag. Steel mills held prices firm and supply contraction provided a floor for spot cargoes and inventories, but were insufficient to reverse the weak market trend. The rigid cost of high-grade NPI continued to pressure steel mill profits. In the short term, futures remained subject to disruptions from US Fed policy and Indonesian nickel news, with the weak off-season supply-demand pattern difficult to alter. Going forward, the focus will be on rate hike expectations, SS futures fluctuations, downstream rigid demand, steel mill maintenance progress, and nickel raw material price trends.