[SMM Stainless Steel Daily Review] SS futures stop rising and pull back, stainless steel spot prices temporarily remain stable, and transactions cool down

According to SMM on July 17, SS futures presented an overall trend of consolidating on a subdued note. Dragged by the broad weakening of the nonferrous metals sector, SS weakened in tandem. As of the market close, the most-traded SS contract settled at 14,645 yuan/mt. In the spot market, driven by the rise in SS futures yesterday, stainless steel spot offers were widely raised yesterday afternoon, with transactions gradually recovering. However, today’s futures stopped rising and pulled back. Although spot offers remained stable for the time being, transactions have weakened somewhat.

SS futures most-traded contract. At 10:15 a.m., SS2608 was reported at 14,795 yuan/mt, up 130 yuan/mt from the previous trading day. Spot premiums for 304/2B in Wuxi were in the range of 225-575 yuan/mt. In the spot market, the average price of cold-rolled 201/2B coil was flat; for cold-rolled unedged 304/2B coil, the average price in Wuxi rose 100 yuan/mt, and the average price in Foshan rose 75 yuan/mt; the price of cold-rolled 316L/2B coil in Wuxi was flat; for hot-rolled 316L/NO.1 coil, offers in Wuxi were flat; and cold-rolled 430/2B coil prices in both Wuxi and Foshan were flat.

This week, on the macro front, US CPI data pulled back, inflation expectations cooled, and market risk appetite recovered slightly. In addition, Indonesia’s Ministry of Energy and Mineral Resources clarified that this year’s nickel ore production quotas would only see a modest additional increase, implying limited growth potential and a persistent tightness in raw material supply, which provided a solid floor for the spot market, driving SHFE nickel and SS futures to stop falling and rebound. On the spot and inventory front, support from steel mills holding prices firm, combined with improving transactions and arrivals, led spot prices to strengthen steadily and inventories to destock notably. This week, mainstream steel mills showed firm willingness to hold prices, effectively stabilizing market trading sentiment. The market remains in the traditional consumption off-season, with overall weak rigid demand from end-users. Downstream acceptance of high-priced goods after the price increases has been insufficient, and a cautious wait-and-see sentiment persists, limiting the upward momentum of spot prices, whose increases clearly lagged behind the futures. Yet, boosted by the futures rebound, the market sentiment of rushing to buy amid rising prices rather than during price downturns heated up, releasing phased restocking demand from terminals and end-users, and markedly improving the trading atmosphere from the previously sluggish pattern. Meanwhile, typhoon weather disrupted logistics and transportation this week, leading to insufficient spot arrivals and slowing the pace of replenishment in the market. The warming of transactions alongside reduced arrivals effectively accelerated the destocking of spot cargoes, causing stainless steel social inventory to pull back significantly this week. The off-season inventory buildup pressure, which had continued to weigh on the market, was relieved in phases, and spot fundamentals recovered marginally. Cost and profit side, this week, the price trends of finished steel and raw materials diverged; smelting profits at steel mills recovered MoM, and the profitability environment continued to improve. During the week, the push for lower raw material prices by steel mills persisted, purchase prices for high-grade NPI remained in the doldrums, and the center of raw material costs shifted downward steadily. On the spot side, supported by steel mills holding prices firm and transactions warming, finished steel prices drifted higher, and the spread between finished steel and raw materials continued to widen, directly driving a notable expansion in stainless steel smelting profit margins. Overall industry profit resilience strengthened further, and profitability pressure on the production side continued to ease. Overall, this week the stainless steel market displayed a pattern of firm spot prices, inventory pullback, and profit recovery. Tight nickel resource expectations underpinned the industry’s bottom, steel mills’ price-holding shored up the spot price center, periodic off-season restocking along with logistics reduction drove inventory destocking, and raw materials in the doldrums further expanded steel mills’ profit margins. However, the core issues of weak off-season rigid demand and insufficient acceptance of high prices have not been fundamentally improved, leaving spot prices lacking sustained strong upward momentum.