[SMM Stainless Steel Daily Review] Nickel Prices Drag Futures Lower, Just-in-time Procurement Provides Support; Stainless Steel Futures and Spot Diverge on First Trading Day After Holiday

According to SMM on October 8, on the first trading day after the National Day holiday, SS futures were dragged lower by SHFE nickel and consolidated downward. As of the close, the most-traded SS contract settled at 13,455 yuan/mt. In the spot market, although SS futures fell significantly, transaction activity improved thanks to post-holiday restocking demand in surrounding markets, and stainless steel spot prices saw limited declines.

SS futures most-traded contract. At 10:15 a.m., SS2611 was at 13,530 yuan/mt, down 165 yuan/mt from the previous trading day. Spot premiums for 304/2B in Wuxi were in the range of 640-1,040 yuan/mt. In the spot market, the average price of Wuxi cold-rolled 201/2B coil was flat; for cold-rolled mill-edge 304/2B coil, the average price in Wuxi fell 25 yuan/mt, and the average price in Foshan fell 50 yuan/mt; Wuxi cold-rolled 316L/2B coil prices were flat; hot-rolled 316L/NO.1 coil quotes in Wuxi were flat; cold-rolled 430/2B coil in both Wuxi and Foshan was flat.

Before the holiday, the stainless steel market overall showed a consolidating pattern of weak external conditions, stable domestic conditions, a failed peak season, and a balance between longs and shorts. Expectations for a traditional September-October peak season recovery completely fell through, end-use demand remained persistently weak, downstream stockpiling was largely wrapped up ahead of the long holiday, the market saw only sporadic need-based transactions, overall trading was sluggish, and the demand side continued to pressure spot prices. Futures moved independently and showed resilience, not following deeply lower despite weakness in nonferrous metals and SHFE nickel, with strong support from low valuations, while spot prices remained firm overall. The cost side continued to improve, with upstream nickel-based and chromium-based raw material prices pulling back persistently, the price spread between finished products and raw materials repairing, reversing the earlier sustained losses, and steel mill production profits gradually returning. On the supply side, expectations for production cuts continued to build, industry supply contracted marginally, and combined with market prices at yearly lows, this effectively limited downside for prices. On the inventory side, the trend shifted from decline to increase, with the earlier destocking pace coming to an end. Affected by sluggish end-use digestion and increased arrivals in the market, social inventory accumulated again, and industry cargo pressure rebounded somewhat. Overall, weak demand and inventory accumulation created bearish factors, while low valuations, production cuts providing a floor, and profit recovery created support. The tug-of-war between longs and shorts was balanced, and the market consolidated at lows. After the holiday, the stainless steel market is likely to continue a pattern of sideways movement and weak supply-demand tug-of-war, with a low probability of one-sided gains or losses. The demand side remains the core constraint, as peak season recovery expectations have been falsified, end-use demand is generally weak, post-holiday work and production resumptions are proceeding gradually, a concentrated restocking rally is unlikely to emerge, and the pace of need-based demand release is slow. The supply and cost side will continue to provide bottom support, with steel mill production cuts being implemented steadily, supply pressure easing marginally, while the decline in raw material prices slows down and steel mill profitability recovers. Inventory side, the holiday shutdown stalled demand, and short-term inventory buildup pressure persists post-holiday, which will continue to cap the rebound. Overall, stainless steel's rise after the holiday is pressured by demand and inventory, while its downside is supported by costs, production cuts, and low valuations, making it hard to rise or fall significantly. Going forward, focus on the pace of end-user restocking, the implementation of steel mill production cuts, raw material price fluctuations, and the progress of inventory destocking.