[SMM Stainless Steel Daily Review] SS Futures Pullback Transmitted to Spot, Stainless Steel Market Wait-and-See Sentiment Intensified with Prices Pulling Back

SMM June 4 reported that SS futures showed a declining and pulling back trend. Driven by lower SHFE nickel prices, SS futures pulled back in tandem, operating overall below the 15,000 yuan/mt level. As of the morning close, the most-traded SS contract was quoted at 14,745 yuan/mt. On the spot market side, influenced by the decline in SS futures, downstream end-users of spot stainless steel saw a notable increase in cautious wait-and-see sentiment, with inquiry and transaction activity in the spot market weakening further, and trader quotes adjusted downward accordingly.

The most-traded SS futures contract declined and pulled back. At 10:15 AM, SS2607 was quoted at 14,770 yuan/mt, down 245 yuan/mt from the previous trading day. Spot premiums for 304/2B in Wuxi were in the range of 400-900 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 fell 50 yuan/mt and in Foshan fell 50 yuan/mt; cold-rolled 316L/2B coil prices in Wuxi remained flat; for hot-rolled 316L/NO.1 coils, Wuxi quotes rose 50 yuan/mt; cold-rolled 430/2B coils in both Wuxi and Foshan remained stable.

This week, the stainless steel market saw futures edge up slightly while spot prices moved sideways and stabilized, with weak futures-spot linkage. The market officially entered the traditional consumption off-season, and fundamental tug-of-war between longs and shorts intensified. Traders had weak confidence in the outlook with strong wait-and-see sentiment, but the slight recovery in futures stabilized market activity. Combined with steel mill agents maintaining stable prices for shipments and sustained rigid demand from downstream providing a floor, social inventory continued to destock slightly. Overall, the market presented a pattern of slight sentiment recovery in futures, rigid demand supporting spot prices, weakening off-season demand, and supply staying high. Futures side, SS futures edged up this week to test a rebound, but upward momentum was insufficient, with futures consistently failing to break through 15,000 yuan/mt. This rebound in futures lacked substantive fundamental support and was driven solely by market sentiment recovery, leaving limited upside room and making it difficult to drive spot prices up in tandem, with the overall trend moving sideways. Spot and inventory side, the slight recovery in futures supported stable spot quotes, with rigid demand transactions remaining steady. Currently, the off-season effect was emerging, with downstream purchase intensity gradually weakening and steel mills receiving fewer forward orders; however, the recovery in futures improved market sentiment, and combined with active shipments by steel mill agents, social inventory continued to destock slightly this week to 936,300 mt, with low inventory levels providing some support for spot prices. Cost and supply side, raw material prices were generally stable, with the uptrend in high-grade NPI slowing down, while stainless steel scrap and high-carbon ferrochrome prices remained stable. Current steel mill profitability was moderate, with spot raw material calculated profit margins at 2%-3% and inventory raw material calculated profit margins at 3.5%-5%, with considerable profits supporting steel mills in maintaining high production schedules. Affected by insufficient off-season orders, the industry had an appeal for price stabilization. Most steel mills were no longer increasing production, and some enterprises plan to cut production for maintenance, but the overall high-supply pattern of the industry has not seen a significant shift. Overall, the weakening demand trend for stainless steel in the off-season was clear, with sluggish forward orders and continuously declining demand-side support. In the short term, futures recovery, rigid demand, and low inventory levels could support stainless steel spot prices against decline, but high production schedule pressure persisted under steel mills' high profit margins. Going forward, off-season demand will further pull back, the supply-demand mismatch will gradually intensify, and the risk of price pullback will rise. Subsequent focus should be on the sustainability of futures rally, changes in downstream rigid demand, the implementation of steel mill maintenance, and raw material price fluctuations.