[SMM Stainless Steel Daily Review] SS futures resumed a downward trend, spot stainless steel prices were weak and trading was sluggish.

According to SMM news on July 8, SS futures fell back overall. Affected by capital-side operations, SS futures ended the previous uptrend and returned to a weakening trend. As of the close, the most-traded SS contract closed at 14,450 yuan/mt. In the spot market, dragged by the pullback in SS futures, stainless steel spot quotes declined in tandem. The market mentality of “rush to buy amid continuous price rise and hold back amid price downturn,” combined with the off-season for consumption, made it hard to reverse the sluggish trading pattern.

SS Futures Most-Traded Contract. At 10:15 AM, SS2608 reported at 14,490 yuan/mt, down 300 yuan/mt from the previous trading day. Spot premiums for 304/2B in Wuxi were in the range of 530-980 yuan/mt. In the spot market, the average price of Wuxi cold-rolled 201/2B coil rose 50 yuan/mt; cold-rolled uncut edge 304/2B coil saw its average price in Wuxi fall 25 yuan/mt, while in Foshan it rose 50 yuan/mt; cold-rolled 316L/2B coil prices in Wuxi were unchanged; hot-rolled 316L/NO.1 coil prices in Wuxi were unchanged; and cold-rolled 430/2B coil prices in both Wuxi and Foshan were unchanged.

This week, macro and industry logic gaming dominated the futures trend. US inflation data pulled back, market expectations for US Fed interest rate hikes further cooled, and the US dollar index weakened, overall boosting valuations of commodities and nonferrous metals and 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 a loose supply of nickel resources ahead. SHFE nickel traded in a low range, failing to rebound effectively. Dragged by nickel prices, SS futures remained in a weak consolidation pattern, struggling to rise, but with the strong support at the key 14,500 yuan/mt level holding, the futures did not break down and moved sideways overall. In terms of spot and inventory, mainstream steel mills remained firm in their willingness to hold prices, locking the downside room for spot prices from the ex-factory side. The market has fully entered the traditional consumption off-season, with terminal rigid demand naturally weak. Combined with the continued weakness of SS futures, overall market trading confidence was insufficient, and traders were more willing to reduce inventory and sell. Downstream end-users maintained a strong wait-and-see sentiment, purchasing mainly on demand, and on-site transactions remained sluggish. On the supply side, news of maintenance and production cuts continued to ferment, and coupled with social inventory that stopped declining and increased slightly but limitedly, overall inventory pressure remained relatively low. Multiple factors jointly supported spot prices to remain firm. Cost and profit side, this week, finished product and raw material prices weakened simultaneously, and the structural price spread improvement led to a WoW expansion in steel mill profits. During the week, the price centers of nickel-based raw materials and stainless steel finished products shifted lower in tandem, with the decline in raw materials larger than that in finished products. Coupled with spot prices remaining firm on the back of steel mills holding prices, the profit margin for finished products was repaired. This week, the overall smelting profit at stainless steel mills expanded, and the industry’s profit environment improved marginally. Overall, the stainless steel market this week exhibited a two-way pattern of macro support and industry pressure, with a clear divergence between weak futures and firm spot prices. Sluggish end-use demand during the off-season and thin transactions were the core bearish fundamental factors, while steel mills holding prices firm, maintenance expectations, and low inventory continued to underpin spot prices. The decline in raw material prices helped improve steel mill profits, easing cost pressures on the production side. In the near term, the market is expected to trade around Fed policy expectations and Indonesian nickel ore policy developments, with futures moving sideways and spot prices remaining firm. Going forward, focus on the US dollar index trend, the implementation of Indonesia’s nickel quotas, key support levels for SS futures, changes in downstream off-season rigid demand, and steel mill maintenance and commissioning progress.