[SMM Stainless Steel Daily Review] Stainless Steel Futures Were in the Doldrums and Pulled Back; Stainless Steel Spot Trading Was Sluggish, with a Wait-and-See Approach Dominating

SMM News on March 5: SS futures showed a fluctuating trend in the doldrums. Although SS in the night session was briefly stronger, it fluctuated and pulled back after the morning open, and in the afternoon it fell further along with an overall dip in some metal futures, finally closing at 14,115 yuan/mt. In the spot market, before noon, boosted by the upswing in SS futures, stainless steel spot quotations were raised in tandem; however, follow-through in actual transactions was insufficient, and downstream players mostly stayed on the sidelines. In the afternoon, as futures pulled back, spot quotations were adjusted downward again. Although downstream end-use demand is gradually recovering, affected by expectations for a high production schedule in March, market confidence in price increases has weakened, with most participants focusing on active shipments.

The most-traded SS futures contract fluctuated downward. At 10:30 a.m., SS2604 was quoted at 14,275 yuan/mt, up 30 yuan/mt from the previous trading day. Spot premiums for 304/2B in Wuxi were in the 295-445 yuan/mt range. In the spot market, Wuxi cold-rolled 201/2B coils were generally stable; for cold-rolled trimmed-edge 304/2B coils, the average price in Wuxi rose by 25 yuan/mt, while the average price in Foshan fell by 50 yuan/mt; cold-rolled 316L/2B coils in Wuxi rose by 200; hot-rolled 316L/NO.1 coils in Wuxi were quoted up 100 yuan/mt; cold-rolled 430/2B coils in both Wuxi and Foshan were generally stable.

The stainless steel market is gradually recovering, and SS futures strengthened and moved higher. Boosted by warming expectations for the traditional peak consumption season of “Golden March and Silver April” and the continued fermentation of news on Indonesian nickel ore, market participants showed strong bullish sentiment. However, the pace of recovery on the spot side was slow; some traders and downstream end-users had not yet resumed operations, market trading activity had not fully recovered, and only a small number of rigid-demand orders were concluded during the week, presenting a clear pattern of “strong futures, weak spot.” On the inventory side, stainless steel social inventory showed a sharp seasonal inventory buildup, mainly due to the suspension of trading during the Chinese New Year holiday, continued arrivals of cargo, and some resources pending pick up goods. From an industry perspective, inventory buildup around the Chinese New Year is normal, and the magnitude of this buildup did not exceed market expectations; market confidence was not materially impacted, traders did not engage in panic shipments, and short-term inventory pressure remained within a controllable range. Supply side, in February, domestic stainless steel mills carried out annual maintenance in a concentrated manner, with sizable production cuts, and production fell sharply, easing short-term supply-side pressure. However, the key point to watch is that in March, steel mills will enter a concentrated phase of resuming production; production is expected to rise significantly, which will test the market’s ability to absorb demand during the “Golden March and Silver April” peak season, and the supply-demand pattern may see a phased adjustment. Cost support continued to strengthen: Indonesian nickel ore-related news continued to ferment, pushing ore prices steadily higher, which in turn boosted NPI production costs, with high-grade NPI prices climbing steadily. Although transactions in the high-grade NPI market were relatively limited this week and leading stainless steel mills have not yet accepted the current high prices, resulting in low purchase willingness, bullish sentiment remained strong and raw material supply was expected to be tight, making it difficult for prices to move lower. This provided solid support for stainless steel production costs, and steel mills still maintained reasonable profitability. Overall, the stainless steel market this week exhibited the core characteristics of “strong expectations, weak reality.” Stronger futures, improved peak-season expectations, and firm support from the cost side jointly boosted market confidence; however, weak spot cargo transactions, a sharp social inventory buildup, and supply pressure brought by concentrated production resumptions at steel mills in March also imposed clear constraints on the market. The current core market tug-of-war centers on the pace of downstream demand recovery after the holiday, the progress of inventory digestion, and the implementation of steel mills resuming production in March. Going forward, close tracking of the above factors is needed to assess the direction of market trends.