[SMM Stainless Steel Daily Review] Macro headwinds, SS futures prices pulled back, and stainless steel spot trading weakened.

According to SMM on July 1, SS futures drifted lower. Dragged by expectations for US Fed interest rate hikes and a sustained decline in SHFE nickel, SS moved down in tandem. As of the midday close, the most-traded SS contract settled at 14,590 yuan/mt. In the spot market, sentiment was cautious overall due to the weakening SS futures and Indonesian policy disturbances. Although traders were eager to sell, transactions remained sluggish.

SS futures most-traded contract. At 10:15 a.m., SS2608 was quoted at 14,550 yuan/mt, up 10 yuan/mt from the previous trading day. Spot premiums for 304/2B in Wuxi were in the 470-970 yuan/mt range. In the spot market, the average price for cold-rolled 201/2B coil in Wuxi was flat; the average price for cold-rolled, un-edged 304/2B coil in Wuxi was flat, and in Foshan it was flat; the price for cold-rolled 316L/2B coil in Wuxi was flat; quotes for hot-rolled 316L/NO.1 coil in Wuxi were flat; cold-rolled 430/2B coil in Wuxi and Foshan were both flat.

Stainless steel futures and spot prices were in the doldrums this week. Macro headwinds outside China and industry sentiment disturbances intensified market pessimism, fully exposing the off-season fundamentals. The overall picture was one of macro pressure on futures, weakening off-season demand, traders cutting prices to reduce inventory, supply contraction supporting inventory levels, and shrinking steel mill profits. Futures were dragged lower by monetary policy and raw material rumors. Spot prices, supported by steel mills holding prices firm, maintained resilience, but end-user transactions were sluggish, leaving the market broadly bearish. On the futures side, macro headwinds dominated this week. Easing US-Iran tensions slightly boosted risk appetite, but hawkish remarks from the US Fed pushed up rate hike expectations, weighing on the overall valuation of the non-ferrous metals sector. Mid-week, rumors of a quota expansion for Indonesian nickel ore circulated. Although officials subsequently denied them, market pessimism had already spread, with funds seeking safety and fleeing, dragging SS futures to continue drifting lower. In terms of spot and inventory, the divergence between futures and spot prices was clear this week, with spot prices showing more resilience than futures. Mainstream steel mills showed a strong willingness to hold prices firm, effectively defending the price floor. However, as the market entered the traditional consumption off-season, end-user rigid demand weakened, and falling futures further undermined market confidence. End-user wait-and-see sentiment was thick, and transactions were sluggish. Traders had a strong need to reduce inventory, leading to frequent low-priced offers. At the same time, steel mill maintenance and production cuts were implemented, resulting in a marginal supply contraction that countered off-season demand pressure. This week, social inventory remained generally stable with no significant fluctuations. On the cost and profit side, finished product and raw material price trends diverged this week, and steel mill profits continued to narrow. Stainless steel spot prices pulled back following futures, with the price center shifting lower. However, expectations were that the supply tightness in high-grade NPI would persist, making prices relatively resilient with limited declines, as raw material costs remained firm. The falling finished product prices combined with rigid costs directly compressed smelting profits, further intensifying overall profitability pressure on the industry. Overall, the market was dominated by macro headwinds this week, as weak off-season rigid demand served as the core fundamental pressure. Steel mills held prices firm and supply contraction supported spot cargo and inventory, but failed to reverse the weak market trend. The rigid cost of high-grade NPI continued to pressure steel mill profits. In the short term, futures were still disrupted by US Fed policies and Indonesia nickel news, and the weak supply-demand pattern in the off-season was hard to change. Going forward, the key focus should be on tracking rate-hike expectations, SS futures fluctuations, downstream rigid demand, steel mill maintenance progress, and price trends of nickel raw materials.