[SMM Stainless Steel Daily Review] Nonferrous Metals Sector Provided Support; Stainless Steel Futures Stopped Falling and Began Rising

According to an SMM report on August 17, SS futures stopped falling and rebounded. Although the Friday night session remained weak, SS successfully reversed its decline and started rising at Monday’s open, supported by broad strength across base metals. By the close, the most-traded SS contract settled at 14,275 yuan/mt. In the spot market, although SS futures had already staged a rebound, the weak trading pattern in the morning stainless steel spot market did not improve. Traders further lowered their quotes, and spot transactions only recovered somewhat as futures gradually rebounded.

SS futures most-traded contract. At 10:15 a.m., SS2610 was at 14,220 yuan/mt, down 25 yuan/mt from the previous trading day. Spot premiums for 304/2B in Wuxi were in the 400-650 yuan/mt range. In the spot market, the average price of cold-rolled 201/2B coils in Wuxi held steady; for cold-rolled mill-edge 304/2B coils, the Wuxi average fell by 125 yuan/mt and the Foshan average fell by 125 yuan/mt; prices of cold-rolled 316L/2B coils in Wuxi were unchanged; for hot-rolled 316L/NO.1 coils, Wuxi quotes were unchanged; cold-rolled 430/2B coils in both Wuxi and Foshan were unchanged.

This week, stainless steel futures were continuously disrupted by macro sentiment and generally maintained a weak pullback trend. During the week, repeated news on approvals for Indonesia’s RKAB nickel ore added ongoing disruptions to industry expectations. Coupled with hawkish signals from the US Fed and the unresolved US-Iran geopolitical conflict, macro uncertainty stayed high. Multiple bearish factors resonated, dragging SS futures to continue pulling back during the week, with bearish sentiment dominating the market and the center of futures trading steadily moving lower. The spot market showed a pattern of weak futures-spot linkage, weak supply and demand, but increasingly evident inventory resilience, with prices generally declining and pulling back. The market remained in the traditional consumption off-season, and signs of recovery ahead of the September-October peak season had yet to emerge. Downstream end-use buyers were cautious in purchasing, and transactions were mainly driven by rigid demand with purchases made as needed. There was no concentrated restocking, rigid-demand continuity was relatively weak, and it was difficult to provide upward support for spot prices. Supply side, stainless steel mills’ August production schedules rose steadily, and the pace of capacity release accelerated. Against the backdrop of end-use demand not recovering in tandem, supply-demand pressure in the market increased at the margin. However, Typhoon “White Dolphin” directly affected east China during the week, with hindered transportation at key ports and in overland logistics, constraining shipment and arrival pace. This temporarily offset the pressure from supply growth, keeping stainless steel social inventory basically stable this week without a notable inventory buildup. A reasonable inventory structure provided bottom support for spot prices. On the cost and profit side, finished product prices pulled back along with futures this week, and steel mills’ efforts to hold prices firm eased somewhat, driving spot quotes lower. However, resilience on the raw material side was sufficient, effectively limiting the price decline. During the week, NPI prices were relatively firm, providing strong support to stainless steel production costs, while the weak pullback in finished product prices led to a narrowing price spread between finished products and raw materials, and steel mills’ smelting profits clearly contracted. Overall, rigid support on the cost side became more pronounced, effectively preventing a deep drop in spot prices. The market showed operating characteristics of “futures down, spot weak; costs underpinning; limited declines.” Overall, this week the stainless steel market presented a tug-of-war pattern featuring macro headwinds dragging futures, weak rigid demand in the off-season, supply growth adding pressure, inventory holding steady to provide a floor, and cost resilience supporting prices against declines. In the short term, the market’s weak fundamentals were clear; steel mills’ gradual production increases further amplified demand pressure in the period ahead, and prices faced the risk of a phased pull back. However, reasonable inventory levels and firm raw material costs formed a dual underpinning, limiting downside room, and the overall market was mainly in the doldrums and consolidating. Going forward, key areas to monitor include changes in macro sentiment, the pace of SS futures fluctuations, the progress of off-season rigid end-user demand recovery, the implementation of steel mills’ production increases, and changes in inventory turnover.