[SMM Stainless Steel Daily Review] SS Futures Continue to Rise, Off-Season Stainless Steel Market Sentiment Warms Up

According to SMM on June 16, SS futures showed further strength and upward probing. Although SHFE nickel showed some weakness, SS continued to hold up well. As of the midday close, the most-traded SS contract settled at 15,180 yuan/mt. In the spot market, driven by the continuous upward probing of SS, transactions and inquiries in the stainless steel spot market were more active. At the same time, news that stainless steel mills had delayed production resumptions, though the off-season had already begun and there was strong macro uncertainty, pushed up market offers to some extent amid sentiment-driven trading.

The Most-Traded SS Futures Contract. At 10:15 AM, SS2607 traded at 15,095 yuan/mt, up 240 yuan/mt from the previous trading day. Spot premiums for Wuxi 304/2B were in the range of 125-525 yuan/mt. In the spot market, the average price of Wuxi cold-rolled 201/2B coil remained steady. For cold-rolled mill edge 304/2B coil, the average price in Wuxi rose by 75 yuan/mt, and in Foshan, it rose by 50 yuan/mt. The price of Wuxi cold-rolled 316L/2B coil increased by 100 yuan/mt. For hot-rolled 316L/NO.1 coil, the offer in Wuxi rose by 50 yuan/mt. Cold-rolled 430/2B coil prices in both Wuxi and Foshan held steady.

This week, both stainless steel futures and spot were under pressure and moved lower in tandem, with ex-China macro headwinds dominating the market and off-season pessimism spreading rapidly. Expectations for the industry's near-term prospects weakened, end-user sentiment was highly cautious, rigid demand remained weak, and traders concentrated on offering discounts to sell and destock. In the futures market, ex-China macro factors became the core driver this week. US non-farm payrolls data significantly exceeded expectations, the unemployment rate stayed low, the market postponed or even canceled expectations for US Fed interest rate cuts within the year, and the US dollar index strengthened to a nearly two-month high, broadly suppressing valuations across the nonferrous metals sector. Weighed down by this, SS futures continued their one-way decline, quickly breaking below the previous support level of 14,500 yuan/mt. Bearish sentiment was intensively released, further dragging down sentiment across the entire industry chain. On the spot and inventory front, spot offer declines this week significantly lagged behind futures, highlighting the divergence between futures and spot prices. The sharp drop in futures dragged down market sentiment, traders' willingness to sell and destock increased significantly, and low-priced goods continued to emerge in the market. Currently, in the traditional consumption off-season, downstream rigid demand is weak, buyer follow-through is insufficient, transactions are only slightly driven by low-priced goods, and overall performance is sluggish. Supply side, this week, some steel mills successively implemented production cuts and maintenance, leading to a marginal contraction in industry supply. Combined with traders actively clearing inventory, social inventory continued to destock and pulled back slightly, even though off-season demand remained weak. Cost side, stainless steel raw material prices were largely resilient to declines this week, diverging from the trend of finished steel products. High-grade NPI posted limited losses, stainless steel scrap and high-carbon ferrochrome prices remained firm, providing strong bottom support from the raw material side. But spot prices continued to pull back, finished steel weakened while costs remained rigid, directly squeezing steel mills' profit margins. Profit calculations show that the profit margin based on spot raw material prices has pulled back to around 1.9%, and dragged down by previously high-priced inventory, the profit margin based on raw material inventory costs further dropped to 0.84%. Overall profitability narrowed significantly, which may increase steel mills' willingness to implement voluntary production cuts. Overall, this week futures pulled back, driving sentiment to turn bearish, and off-season rigid demand remained weak. Although steel mill maintenance and traders' active destocking led to a slight pullback in inventory, providing some support to spot prices, it was difficult to reverse the overall weak trend. Raw material prices remained firm, holding the bottom for spot prices and limiting the room for deep declines. In the short term, the market will maintain a pattern of weak futures, resilient spot prices, and sluggish transactions. Going forward, the focus is on US Fed policy expectations, US dollar index trends, the support strength of SS futures, the sustainability of downstream rigid demand, and the progress of steel mill maintenance implementation.