[SMM Stainless Steel Daily Review] SS futures continue to consolidate on a weak note, spot stainless steel low-price transactions see some recovery

As reported by SMM on August 24, SS futures continued to consolidate on a subdued note, extending the weakening trend from last week, with overall consolidation on a weak note and limited trading range. At the close, the most-traded SS contract settled at 14,215 yuan/mt. In the spot market, the downtrend in SS futures gradually eased, while SHFE nickel saw a tentative uptick. Combined with improved market sentiment ahead of the peak season and spot prices currently at low levels, intraday transactions recovered somewhat.

The most-traded SS futures contract. At 10:15, SS2610 was quoted at 14,260 yuan/mt, up 55 yuan/mt from the previous trading day. The spot premium for 304/2B in Wuxi ranged between 410-610 yuan/mt. In the spot market, the average price of cold-rolled 201/2B coil in Wuxi was flat; cold-rolled 304/2B coil (mill edge) averaged up 25 yuan/mt in Wuxi and was flat in Foshan; cold-rolled 316l/2B coil in Wuxi was flat; hot-rolled 316L/NO.1 coil in Wuxi was flat; cold-rolled 430/2B coil in both Wuxi and Foshaan was flat.

This week, stainless steel futures overall consolidated at lows. Earlier, impacted by news of increased RKAB nickel ore quotas in Indonesia, SS futures tumbled sharply, dragging the overall market valuation down to a low range. This week, driven by a general recovery in non-ferrous metals, futures staged a phased corrective rebound, but the previous bearish sentiment has not fully dissipated, leading to a weak recovery and overall still consolidating at lows, with insufficient restoration of bullish confidence. The spot market followed the futures on a weak note, with the price center edging lower. The pre-peak season warming fell short of expectations, and the supply-demand loosening pattern continued to stand out. As the market nears the traditional September-October peak season, end-user stockpiling in advance was sluggish, with downstream demand not showing a substantial recovery. On-site transactions remained weak, mainly driven by rigid demand and sporadic batch purchases, lacking sustained centralized restocking support. Affected by the low-level futures, market pessimism persisted, coupled with steel mills' willingness to hold prices firm loosening, spot quotes pulled back accordingly, and the market price center kept moving lower. Supply-side pressure further intensified, with August steel mill production schedules increasing MoM and industry capacity release accelerating. Against the backdrop of persistently weak end-use demand, the destocking pressure on market cargo continued to mount, pushing stainless steel social inventories higher this week, with the inventory buildup trend continuing and the supply-demand loosening contradiction becoming prominent in the tail of the off-season. Cost and profit sides provided bottom support, effectively limiting the scope for spot downside. This week, stainless steel finished product and raw material prices both declined, but the decline in finished product prices was significantly larger than that of raw materials, leading to a continuous contraction in the price spread between finished products and raw materials. Steel mill smelting profits were further compressed, and the industry is now approaching the brink of losses. Cost support is gradually strengthening, providing a hard floor for spot prices, limiting their downside room, and the market shows weakness with resilience. Overall, this week the stainless steel market has been characterized by a game pattern of low-level weak recovery in futures, spot prices weakening with futures, sluggish demand during the peak season warm-up, inventory buildup from rising supply growth, and cost support near losses underpinning prices. In the short term, the lack of pre-season stockpiling demand, rebound in steel mill production schedules, and continuous inventory buildup constitute the core bearish factors, making it difficult for prices to escape the doldrums. However, the risk of cost losses is emerging, with bottom support strengthening, limiting deep downside room, and the market is likely to remain in a consolidation pattern on a weak note. Subsequent focus will be on the sustainability of SS futures recovery, the pace of downstream pre-season stockpiling, changes in steel mill production schedules, shifts in the price spread between raw materials and finished products, and the progress of inventory buildup.