[SMM Stainless Steel Daily Review] Funds Drive Up SS Futures, Strengthening the Market; Stainless Steel Spot Market Trading Sluggish

According to SMM on July 7, SS futures overall maintained a consolidation pattern on a strong note. Fundamentals have not shown significant changes. Driven by capital-side operations, SS continued the strengthening trend from the previous trading day. As of the close, the most-traded SS contract settled at 14,775 yuan/mt. In the spot market, although SS futures remained strong, spot fundamentals showed no notable improvement: although spot offers were raised following the uptrend, after concentrated deals on low-priced materials were completed yesterday, market trading weakened again today, and confidence in the outlook remains insufficient.

SS Futures Most-Traded Contract. At 10:15 a.m., SS2608 was quoted at 14,790 yuan/mt, up 65 yuan/mt from the previous trading day. Spot premiums for 304/2B in Wuxi were in the range of 280-680 yuan/mt. In the spot market, the average price of cold-rolled 201/2B coils in Wuxi was flat; for cold-rolled raw-edge 304/2B coils, the average price in Wuxi rose 50 yuan/mt, and the average price in Foshan rose 50 yuan/mt; cold-rolled 316L/2B coil prices in Wuxi were flat; hot-rolled 316L/NO.1 coil offers in Wuxi were flat; cold-rolled 430/2B coils in both Wuxi and Foshan were flat.

This week, the tug-of-war between macro and industrial factors dominated futures movements. US inflation data pulled back, further cooling expectations for US Fed interest rate hikes, and the US dollar index weakened, which overall boosted the valuation of commodities and non-ferrous metals, providing macro support for the metals sector. However, industry sentiment remained bearish. The issue of supplementary quotas for Indonesian nickel ore remained unresolved, and the market had strong concerns about ample nickel supply ahead. SHFE nickel traded in a low range, failing to rebound effectively. Dragged by nickel prices, SS futures remained in the doldrums overall, struggling to rise. However, the key support at the 14,500 yuan/mt level was relatively strong, and futures did not break down through that level, moving sideways overall. On the spot and inventory side, mainstream steel mills remained firm in holding prices, limiting the downside room for spot prices from the ex-factory side. The market has now fully entered the traditional consumption off-season. End-user rigid demand was naturally weak, and with SS futures remaining in the doldrums, overall trading confidence was insufficient. Traders had a strong willingness to reduce inventory and sell. Downstream end-users showed strong wait-and-see sentiment, mainly purchasing on demand, and market trading remained sluggish. On the supply side, news of maintenance and production cuts continued to ferment. Combined with the fact that social inventory this round stopped declining and edged up slightly but with limited increase, overall inventory pressure remained relatively low. These multiple factors jointly supported spot prices remaining firm. On the cost and profit side, both finished product and raw material prices weakened simultaneously this week, and the improvement in structural price spreads led steel mill profits to expand WoW. During the week, the price centers of nickel-based raw materials and stainless steel finished products both shifted lower, with raw materials declining more than finished products. Combined with spot prices staying firm, supported by steel mills holding prices, profit margins for finished products recovered. This week, overall smelting profits at stainless steel mills expanded, and the industry's profitability environment improved marginally. Overall, the stainless steel market this week showed a two-way pattern of macro support and industry suppression, with a clear divergence between weak futures and firm spot prices. Sluggish end-use demand and thin trading during the off-season were the core fundamental bearish factors, while steel mills holding prices, maintenance expectations, and low inventory continued to underpin spot prices. Falling raw material prices gave back profits, repairing steel mill profits and easing profit pressure on the production side. In the short term, the market will continue to move around the US Fed's policy expectations and Indonesia's nickel ore policy maneuvers, with futures moving sideways and the firm spot price pattern persisting. Going forward, key tracking points include US dollar index movements, the implementation status of Indonesia's nickel quotas, the strength of key support levels for SS futures, changes in downstream off-season rigid demand, and steel mill maintenance and commissioning progress.