[SMM Analysis] Futures Wild Swings and Sluggish Off-Season Trading Accelerate Stainless Steel Inventory Buildup

SMM July 9 – This week, the pace of stainless steel social inventory buildup accelerated, with the increase in core market inventories widening and inventory buildup pressure gradually surfacing. Total inventories in the two core markets of Wuxi and Foshan continued to rise, from 935,400 mt on July 2 to 943,700 mt on July 9, up 0.89% WoW, further intensifying the off-season inventory accumulation trend.

This week, the stainless steel market remained in a traditional consumption off-season pattern, with sluggish end-user rigid demand persisting and the pace of inventory buildup clearly accelerating. During the week, SS futures were mainly driven by capital-side disturbances, retreating after a rapid rise and swinging wildly, with the wild swings repeatedly unsettling spot market sentiment. Only occasional concentrated transactions occurred, with very poor sustainability, and then quickly returned to the off-season's mediocre trading conditions. Meanwhile, major stainless steel mills ended their earlier stance of holding prices firm and proactively lowered market guidance prices, further weakening overall bullish confidence. Downstream end-users grew more cautious, and their willingness to purchase remained weak, sharply reducing the destocking efficiency of spot cargo. On the supply side, although the industry's monthly production schedule declined overall, marginally easing the pressure from supply releases, it could not offset the negative impact of sharply weakening off-season demand. The supply-demand mismatch intensified, ultimately driving accelerated accumulation of stainless steel social inventories this week.

In summary, wild swings in futures disturbing market sentiment, steel mills' retreat from holding prices firm dragging down spot confidence, and persistently sluggish end-user transactions during the off-season were the core drivers behind the accelerated inventory buildup of stainless steel this week. The decline in production schedules on the supply side only slightly eased supply pressure and could not reverse the off-season inventory buildup trend. At present, stainless steel fundamentals are clearly weak, with no real recovery momentum on the demand side and weak trading sentiment. In the short term, the weak supply-demand pattern during the off-season will persist, and inventories will most likely continue to accumulate. Going forward, close attention should be paid to the pace of SS futures fluctuations, changes in downstream off-season rigid demand, steel mills' price adjustment strategies, and actual supply arrivals to assess whether the pace of inventory buildup can marginally converge.