[SMM Stainless Steel Daily Review] Firm Raw Material Costs Combined with Low Inventory, Stainless Steel Prices Fluctuate at Highs

SMM April 24 reported that SS futures showed a surging upward trend. Driven by news related to Indonesian nickel ore, SHFE nickel and SS futures rallied significantly, with SS breaking above the high since 2023 again, once touching 15,230 yuan/mt. As of the midday close, the most-traded SS contract was quoted at 15,160 yuan/mt. Spot market side, driven by the strengthening of SS futures, stainless steel spot prices rose in tandem. Although prices rose in the short term, downstream end-users had not fully accepted them due to a cautious wait-and-see sentiment. However, low-priced cargoes were already hard to find in the market. In addition, stainless steel social inventory continued to decline, and traders faced relatively low inventory pressure.

The most-traded SS contract strengthened and probed higher. At 10:15 AM, SS2605 was quoted at 15,165 yuan/mt, up 320 yuan/mt from the previous trading day. Spot premiums for 304/2B in the Wuxi area ranged from 145-55 yuan/mt. In the spot market, the average price of cold-rolled 201/2B coils in Wuxi remained flat; for cold-rolled untrimmed 304/2B coils, the average price in Wuxi rose 50 yuan/mt and in Foshan rose 50 yuan/mt; cold-rolled 316L/2B coils in Wuxi rose 200 yuan/mt; hot-rolled 316L/NO.1 coils in Wuxi rose 100 yuan/mt; cold-rolled 430/2B coils in both Wuxi and Foshan remained stable.

Currently, the stainless steel market held up well in spot quotations driven by the surge in SS futures, but downstream end-users maintained a cautious wait-and-see sentiment. Actual transaction volume was generally weak and significantly influenced by futures price changes, showing phased concentrated transaction patterns, with overall demand not fully matching the price increase. Futures side, the stainless steel market this week showed a "first decline then rise" pattern. At the beginning of the week, fundamentals showed mediocre performance, and SS futures pulled back slightly from high levels. Subsequently, driven by the news that a nickel mine in Indonesia would halt production in mid-May, expectations of tight nickel supply heated up, and SS futures surged further, breaking above the high since 2023 again, significantly boosting market sentiment. Supply and inventory side, steel mills' allocation volumes for stainless steel remained low during the month, leading to shortages of certain specifications in the market. Traders held relatively low inventory levels with weak willingness to offer discounts, supporting spot prices to remain firm. Benefiting from increased market inquiries driven by the strengthening of SS futures and phased transaction releases, stainless steel social inventory further pulled back to 949,940 mt this week, down 1.22% WoW, easing inventory pressure somewhat. However, as stainless steel mills were still moderately profitable, the high production schedule pattern was unlikely to change in the short term, and supply-side pressure continued to persist. Cost side, driven by Indonesian nickel ore news and the strengthening of SHFE nickel futures, high-grade NPI prices continued to hold up well, but stainless steel mills still had a certain desire to bargain down prices and purchased less, which to some extent restrained the upward magnitude of high-grade NPI prices. Stainless steel scrap prices rose in tandem with stainless steel finished products during the week, pushing stainless steel production costs further up. As costs and finished product prices strengthened in sync, steel mill profit margins for stainless steel remained largely stable with no notable fluctuations. Overall, although tightening Indonesian nickel ore policies drove futures higher and provided sustained support on the cost side, and continued inventory pullback eased market pressure, the cautious sentiment among downstream end-users was hard to change, with lackluster actual order transactions. Combined with the unchanged high production schedule pattern at steel mills, stainless steel prices are expected to stabilize at highs in the short term, with certain resistance to further upside exploration.