Short-Term Spot Prices of Stainless Steel to Stabilise, and the Futures Prices to Fluctuate Upwards

SHANGHAI, Feb 22 (SMM) - Social stocks of stainless steel may be slowly consumed with the gradual release of consumption. Recently, the most-traded stainless steel contract has risen four consecutive days, and the prices added 1.43% as of 10:43 a.m. on February 22.
Spot: Since the beginning of February, the average spot price of #304/2B (burr edge, in Wuxi) has continued to decline. On February 21, the average price stood flat at 17,150 yuan/mt from the previous trading day.

According to SMM research, the recent #304 hot-rolled coil transactions were acceptable. Besides, a stainless steel mill in east China tentatively decided not to ship #304 hot-rolled coils to the east China market next week so as to gradually ease the inventory pressure of hot-rolled coils. Spot quotes of cold-rolled coils rose slightly yesterday, and the transactions were average. Warrant trading also weakened.
Costs: NPI sellers lowered their quotes, and panic filled the market. Meanwhile, the low purchase prices offered by stainless steel mills cast a huge pressure on the NPI plants. The short-term NPI prices will probably fall.

High-carbon ferrochrome prices dropped somewhat last week. Recently, chrome ore inventory at port has remained low. Many ferrochrome plants in south China still suffered losses from their spot raw materials. SMM believes that the short-term ferrochrome prices will be firmly supported by the unresolved supply tightness of ferrochrome and chrome ore.  On February 21, the average price of high-carbon ferrochrome was 9,300 yuan/mt (Cr 50%).

Inventory: In the second half of February, the stainless steel mills focused on ease their inventory pressure. According to SMM research, in mid-February, although stainless steel mills have lowered their prices for several times, the bid prices were still higher than the traded price of spots. The traders bore high costs and were less willing to restock. Meanwhile, stainless steel mills controlled the shipments to the market, which may alleviate the mismatch between supply and demand. In addition, the operating rates of most processing plants have resumed. With the gradual fulfillment of terminal demand, the downstream plants will become more willing to restock. SMM expects that the spot prices of stainless steel will remain stable with occasional drops in February, and the inventory may fall slowly from highs. It is still necessary to continue to pay attention to the substantial increase in terminal demand.

As of February 15, the total social stock of stainless steel was about 846,100 mt, up 23.75% MoM and 8.54% from the second half of January. 
Stainless steel mills have recently controlled the pace of shipments, and social inventory may decrease slowly. It is expected that the spot prices of stainless steel will temporarily stabilise in the short term, and the futures prices may fluctuate upwards.