[SMM Stainless Steel Daily Review] SS Futures Continue to Pull Back, Stainless Steel Spot Prices Drop

According to SMM on July 28, SS futures showed a trend of further retreat. Dragged down by a collective decline in non-ferrous metals futures, SS pulled back in tandem, with the most-traded SS contract settling at 14,515 yuan/mt as of the close. In the spot market, affected by the consecutive pullbacks in SS futures, market confidence continued to weaken. Additionally, previously idled stainless steel mills resumed production, increasing supply and adding further pressure to a market already grappling with weak consumption, leading stainless steel quotes to also decline.

The most-traded SS futures contract. At 10:15 a.m., SS2609 was quoted at 14,540 yuan/mt, down 170 yuan/mt from the previous trading day. Spot premiums for 304/2B in Wuxi were in the range of 430-830 yuan/mt. In the spot market, the average price of cold-rolled 201/2B coil was flat; cold-rolled mill-edge 304/2B coil, the average price in Wuxi fell 50 yuan/mt, and in Foshan down 50 yuan/mt; cold-rolled 316L/2B coil in Wuxi fell 75 yuan/mt; hot-rolled 316L/NO.1 coil, the quote in Wuxi was flat; cold-rolled 430/2B coil in both Wuxi and Foshan was flat.

This week, positive resonance between macro and industrial factors supported nickel and stainless steel futures to consolidate on a strong note. On the macro front, US inflation expectations retreated, while geopolitical conflicts between the US and Iran continued to unsettle market risk sentiment. On the industrial front, earlier expectations of limited incremental RKAB nickel ore supplementary quotas in Indonesia continued to ferment, effectively stabilizing the bottom of nickel prices, driving SHFE nickel to consolidate on a strong note, and SS futures followed nickel prices to hold up well. In terms of spot and inventory, SS futures consolidated on a strong note this week, repairing market confidence and triggering a concentrated release of spot transactions at the beginning of the week. Low-priced cargoes saw relatively stable just-in-time procurement, ensuring resilience in basic transactions. However, the market remained in the traditional consumption off-season, with limited overall effective demand from downstream end-users, insufficient just-in-time support from the industry, and weak acceptance of high-priced cargoes, leading to insufficient momentum for spot price increases. Spot price increases significantly lagged behind futures, and spot prices generally fluctuated within a range with limited fluctuations throughout the week. Inventory logic clearly weakened. The impact of typhoon weather that previously constrained arrivals faded, and previously stranded off-site cargoes arrived at ports and entered warehouses in a concentrated manner. Coupled with steel mills continuing normal distribution and ample market supply, against the backdrop of end-use demand struggling to effectively absorb incremental cargoes, stainless steel social inventory saw a slight buildup this week, and off-season inventory pressure began to emerge at the margin. On the cost and profit side, the tug-of-war between longs and shorts in the raw material market intensified this week, the price spread between finished products and raw materials was basically stable, and steel mill smelting profits were generally steady. Throughout the week, stainless steel mills maintained their desire to bargain down raw material prices, adopted a cautious procurement attitude, and overall raw material transactions were weak. Under the pressure of persistent mill push for lower prices and weak just-in-time procurement, NPI prices were generally stable with no notable fluctuations; while stainless steel scrap edged higher, following the strong trend in finished product futures. This week, profitability at stainless steel mills remained largely stable, with no notable change in industry profitability. Overall, the stainless steel market this week exhibited a game of macro support for futures, off-season constraints on spot prices, some inventory buildup, and steady profits. Macro sentiment and expectations of tight nickel supply supported futures, which consolidated on a strong note. The recovery in futures helped restore market transactions, but rigid demand during the off-season was weak, and insufficient acceptance of high prices continued to cap upside room for spot cargoes. Improved weather led to concentrated arrivals of supply, and combined with normal allocations from steel mills, this pushed inventories slightly higher. The raw material side saw a balanced tug-of-war between longs and shorts, stable price spreads between finished products and raw materials, and steady mill profits. In the near term, the market is expected to maintain a structural pattern of relatively strong futures and mild fluctuations in spot prices, with key factors to watch being changes in macro sentiment, the movement of SHFE nickel futures, the strength of downstream off-season rigid demand release, the pace of inventory buildup, and the tug-of-war in raw material procurement.