Stainless steel futures contract rebounded on improved fundamentals

Stainless steel futures contract showed strong trend last week. As of the closing on December 21, the price rose by 410 yuan/mt compared to the December 15. On the macro front, internationally, after the dovish remarks from the Federal Reserve, the current interest rate level may be approaching the peak of the Fed's current tightening cycle. However, the US GDP growth rate for the third quarter was revised down to 4.9% from a 0.3 percentage point decrease compared to the previous quarter. The initial jobless claims in the US slightly increased, leading to heightened expectations in the market for the Federal Reserve to cut interest rates three times. Additionally, the overnight dollar dipped to a low of 101.73, hitting a new low since August. Positive factors boost the stainless steel market. Domestically, as of December 22, the total domestic open interest decreased by approximately 15,680 lots compared to the previous week. On the fundamental side, the current spot resource in the supply sector is generally tight. Due to reduced production in stainless steel plants, the supply-demand imbalance has improved, leading to a continuous decrease in social inventories. On the demand side, overall downstream demand remains generally stable but slightly weak. As we approach the year-end, some terminal demand is picking up, leading to an improvement in spot transactions. In raw materials, high-carbon ferrochrome bid prices maintained stable. Lower-priced sources have disappeared, maintaining a steady price trend. The reduction in high-grade NPI inventories, coupled with ongoing support from nickel ore costs, has led to a rebound in high-grade NPI prices. Stainless steel production costs trended upward, and finished product prices recovered. The market continued to rise until last Friday, then experienced narrow fluctuations and dropped. With the reduction in price differences, contract prices regained support and strengthened. The current total trading volume has decreased by 35,128 lots, indicating a divergence in market sentiment between bulls and bears. SMM predicts that the stainless steel market will experience a stable and slightly fluctuating trend this week.