[SMM Stainless Steel Daily Review] Stainless steel futures continue to pull back, spot market confidence weakens.

SMM reported on June 10 that SS futures retreated, showing a downward probing trend. Dragged further by the overall weakness in nonferrous metal futures, SS futures continued their pullback. By midday close, the most-traded SS futures contract was quoted at 14,410 yuan/mt. In the spot market, the successive declines in SS futures broke the 14,500 yuan/mt support level that the market had previously hoped would hold, significantly weakening market confidence. Traders showed a markedly stronger willingness to sell and destock, with low-priced cargoes emerging frequently. Buying interest was clearly insufficient, and overall intraday transactions were mediocre.

The most-traded SS futures contract retreated. At 10:15 a.m., SS2607 traded at 14,395 yuan/mt, down 75 yuan/mt from the previous trading day. Spot premiums for 304/2B in Wuxi were in the range of 575-1,225 yuan/mt. In the spot market, the average price of cold-rolled 201/2B coils in Wuxi was flat; the average price of cold-rolled 304/2B coils with raw edges fell 50 yuan/mt in Wuxi and 25 yuan/mt in Foshan; the price of cold-rolled 316L/2B coils in Wuxi was unchanged; the quotation for hot-rolled 316L/NO.1 coils in Wuxi dropped by 100 yuan/mt; cold-rolled 430/2B coils in both Wuxi and Foshan held steady.

Stainless steel futures and spot experienced heightened volatility. Futures were disrupted by overseas macro news, rising first before pulling back, and the off-season characteristics of the market became fully evident. The industry held vague expectations for the near-term outlook, with a strong wait-and-see sentiment. Transaction volumes showed sporadic recovery but lacked sustainability, increasing shipment pressure on traders, who mostly offered discounts to boost deals. Overall, the market presented a tug-of-war pattern where macro news disturbed futures, off-season demand weakened, supply saw marginal adjustments, and inventory stopped falling and began building up. On the futures side, SS futures were extremely volatile, retreating after a rapid rise. During the week, the US adjusted tariffs on certain steel, aluminum, and copper imports, boosting market sentiment and driving a broad rally in the nonferrous metals sector; SS futures surged simultaneously to 15,175 yuan/mt. However, subsequent US economic data showed persistent inflation pressure, raising expectations for US Fed interest rate hikes and weighing on commodity markets. Metals futures weakened across the board, and SS futures pulled back accordingly. Recent market movements were dominated by macro news, with weak support from industry chain fundamentals. In terms of spot and inventory, the mid-week rally in futures lifted spot prices temporarily, releasing the sentiment of rushing to buy amid continuous price rise and briefly reviving transactions. However, the market had already entered the traditional consumption off-season, and overall end-user rigid demand remained weak. After futures pulled back, deals turned sluggish again. Affected by weak sales, traders generally offered concessions to move goods. Supply side, in June some steel mills planned maintenances and production cuts, leading to a slight pullback in industry output, moderately easing supply pressure, but the magnitude of cuts was limited, so supply pressure was not substantially relieved. Weighed by the weak supply-demand setup, stainless steel social inventory built up slightly during the week to 940,400 mt, ending the earlier persistent destocking trend. Cost and supply side, the raw material market was overall mediocre, the upward trend of high-grade NPI slowed down, and stainless steel scrap and high-carbon ferrochrome prices were basically stable. The raw material side lacked upward momentum, and its boost to finished product prices was limited. Currently, steel mill profitability was good, with the profit margin calculated based on spot raw materials maintained at 2%-3%, and the margin based on inventory raw materials reaching 3.5%-5%. Ample profits supported steel mills' production enthusiasm, and the overall production schedule of the industry was high. Supported by stable costs and moderate profits, steel mills had a weak willingness to actively cut production, and the supply side only saw marginal adjustments. Overall, the current stainless steel market was significantly affected by macro disturbances, futures dominated spot trends, and overall market sentiment was cautious. Fundamentally, the off-season demand weakening trend was clear, and sluggish end-user transactions were the core bearish factor. Although steel mill maintenance brought a small supply contraction, high profits supported high production schedules, the weak supply-demand balance was disrupted, and inventories slightly rebounded. The raw material side’s support was weak, making it difficult to offset demand-side pressures. The risk of supply-demand mismatch persisted, and prices were overall under pressure. Subsequently, key focus was on US Fed policy expectations, SS futures fluctuations, downstream off-season rigid demand changes, and the progress of steel mill maintenance implementation.