[SMM Stainless Steel Daily Review] SS futures consolidate on a strong note, spot stainless steel sells at stable prices with transactions slightly warming up.

According to SMM on July 21, SS futures maintained a consolidation on a strong note. As the non-ferrous metals sector further surged, SS drifted higher in tandem, and as of the midday close, the most-traded SS contract closed at 14,775 yuan/mt. Spot market side, driven by the stronger SS futures, although affected by traders actively selling and weak demand in the traditional off-season, downstream acceptance of high-priced cargoes was low, stainless steel spot offers remained temporarily stable, but market trading activity had already picked up to some extent.

SS futures most-traded contract. At 10:15 a.m., SS2609 reported at 14,740 yuan/mt, unchanged from the previous trading day. Spot premiums for 304/2B in Wuxi were in the range of 230-630 yuan/mt. In the spot market, the average price for cold-rolled 201/2B coil in Wuxi remained flat; cold-rolled raw edge 304/2B coil, average prices in Wuxi and Foshan were both flat; 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, macro side, US CPI data fell, inflation expectations cooled, and market risk appetite slightly recovered. Combined with the Indonesian Ministry of Energy and Mineral Resources clarifying that nickel ore production quotas for the year would only be increased by a modest small amount, the limited growth potential and continued tight raw material supply provided solid floor support for the spot market, driving SHFE nickel and SS futures to stop falling and rebound. Spot and inventory side, steel mills held prices firm to underpin the market, along with improvements in both transactions and arrivals, leading to steady strengthening of spot prices and significant inventory destocking. Mainstream steel mills maintained firm price-holding intentions this week, effectively stabilizing market trading sentiment. The market remained in the traditional consumption off-season, with overall weak end-user rigid demand, and downstream acceptance of high-priced cargoes after price increases was insufficient, along with persistent cautious wait-and-see sentiment, limiting the strength of spot price increases, with gains clearly lagging behind futures. However, driven by the futures rebound, the market’s “rush to buy amid continuous price rise and hold back amid price downturn” sentiment heated up, releasing phased restocking demand from end-users, and on-site trading atmosphere clearly improved from the earlier sluggish pattern. Meanwhile, typhoon weather disrupted logistics and transportation this week, leading to insufficient spot arrivals and a slower pace of cargo replenishment. Recovering transactions combined with reduced arrivals effectively accelerated spot cargo destocking, driving a clear decline in stainless steel social inventory this week and temporarily alleviating the off-season inventory buildup pressure that had been weighing on the market, with spot fundamentals marginally improving. Cost and profit side, finished steel and raw material prices diverged this week, with smelting profits at steel mills recovering WoW and the earnings environment continuing to improve. Steel mills maintained raw material price-pushing for lower prices during the week, with high-grade NPI purchase prices remaining weak, and the center of raw material costs steadily shifting downward. Spot side, supported by steel mills’ price-holding and recovering transactions, finished steel prices drifted higher, and the price spread between finished steel and raw materials continued to widen, directly expanding stainless steel smelting profit margins significantly, further strengthening the overall earnings resilience of the industry, and continuously easing profit pressure on the production side. Overall, the stainless steel market this week exhibited a pattern of firm spot prices, inventory declines, and profit recovery. Tight expectations for nickel resources underpinned the industry bottom; steel mills held prices firm, solidifying the spot price center; off-season phased restocking and reduced logistics drove inventory destocking; and raw materials in the doldrums further expanded steel mills' profit margins. However, the core problems of weak off-season rigid demand and insufficient acceptance of high prices have not yet fundamentally improved, and spot prices lack the momentum for a sustained sharp rise.