Stainless Steel Price Drop Stimulates Destocking, But Significant Inventory Buildup Expected Later [SMM Analysis]

As of November 14, the SMM report shows that the total social inventory of stainless steel reached 975,700 mt, down approximately 0.25% WoW. Among them, the inventory of the 200 series was 286,500 mt, down about 0.7% WoW; the 300 series inventory was 548,200 mt, down about 0.99% WoW; and the 400 series inventory was 141,000 mt, down about 0.77% WoW.

For the 200 series, concentrated arrivals in Wuxi over the weekend have not yet been counted in the inventory, with overall supply normal and inventory slightly decreasing by 1.29%. In Foshan, due to concentrated arrivals from stainless steel mills, supply increased significantly, coupled with weak market demand, leading to an inventory increase of 1.98%.

For the 300 series, the significant drop in futures prices led to a simultaneous decline in spot prices. The rapid price drop below the cost line stimulated some speculative demand, resulting in good sales of cold-rolled coils. This time, cold-rolled arrivals were fewer, while hot-rolled arrivals increased significantly, leading to a notable reduction in overall inventory. In Wuxi, cold-rolled inventory decreased by 0.98%, while hot-rolled inventory increased by 1.32%. In Foshan, due to the significant drop in cold-rolled prices, sales improved, and with reduced distribution volumes, both cold and hot-rolled inventories decreased significantly, with a destocking of 2.36%.

For the 400 series, in Wuxi, cold-rolled distribution was normal, hot-rolled arrivals were few, and sales were stable, leading to a slight inventory increase of 0.1%. In Foshan, due to increased arrivals but poor sales, inventory increased by 2.26%.

The destocking phenomenon of stainless steel in the first half of November boosted market confidence, but the destocking was mainly due to reduced shipments in the previous period and favourable macro news, with excessive price drops stimulating speculative demand. However, according to the SMM survey and market information, a large number of in-transit resources are expected to arrive in late November, including shipments from south and east China and the return of 300 series cold-rolled resources from Indonesia. Meanwhile, demand has clearly entered the off-season, and after significant price drops, purchasing has become more cautious. Therefore, it is expected that supply will increase significantly in late November, but sales will be difficult, leading to a significant inventory buildup.