[SMM Stainless Steel Daily Review] Macro Disturbances Cause SS Futures Fluctuations, Stainless Steel Spot Transactions Weaken while Prices Hold Firm

According to SMM on June 18, SS futures were in the doldrums. Despite the pullback, losses were limited, and they moved sideways during the day. By the close, the most-traded SS contract settled at 15,150 yuan/mt. In the spot market, influenced by the sideways movement of futures and the upcoming Dragon Boat Festival holiday, trading was relatively mediocre under the dual impact of cautious wait-and-see sentiment and the holiday atmosphere. Quotes, supported by steel mill guidance prices, remained firm.

SS futures most-traded contract. At 10:15 AM, SS2607 was at 15,060 yuan/mt, down 150 yuan/mt from the previous trading day. Spot premiums for 304/2B in the Wuxi region were in the 160-560 yuan/mt range. In the spot market, the average price of cold-rolled 201/2B coils in Wuxi was unchanged; cold-rolled raw-edge 304/2B coils, average prices in Wuxi were unchanged and in Foshan were unchanged. Prices of cold-rolled 316L/2B coils in Wuxi were flat; for hot-rolled 316L/NO.1 coils, quotes in Wuxi rose by 70 yuan/mt. Cold-rolled 430/2B coils in both Wuxi and Foshan held steady.

This week, stainless steel futures and spots experienced wild swings. Overseas macro expectations repeatedly disturbed the futures, and the tug-of-war between longs and shorts in the market intensified. The overall landscape was characterized by macro-driven futures, transactions fluctuating with sentiment, supply tightening supporting spot prices, stable inventory, and minor profit recovery. At the start of the week, macro tailwinds buoyed the market, and the futures rebound led to a recovery in spot trading. Mid-week, hawkish expectations from the US Fed intensified, weakening futures again, and end-user procurement became more cautious. Supported by steel mills holding prices firm and marginal supply contraction, spot prices edged up slightly with limited fluctuations, featuring a notable divergence between futures and spot markets. On the futures side, this week's trend was entirely dominated by overseas macro factors, with futures generally rising first then pulling back. At the beginning of the week, cooling geopolitical tensions between the US and Iran, coupled with weaker US core CPI data, fueled expectations of easing inflation, driving a collective rally in the non-ferrous metals sector. SS futures rebounded, repairing prior weakness. However, mid-week, the US Fed released hawkish signals at its monetary policy meeting, reigniting expectations of interest rate hikes. Macro tailwinds quickly faded, risk aversion among capital rose, dragging down SS futures, which pulled back and generally exhibited a weak, fluctuating trend. In terms of spot goods and inventory, spot transactions this week were highly correlated with futures, with notable staged divergence. At the start of the week, a stronger futures market stimulated centralized end-user replenishment, leading to a significant volume of market transactions. Mid-week, after futures weakened, wait-and-see sentiment grew, and trading volumes quickly turned mediocre. Overall, social inventory of stainless steel remained stable this week. The supply side provided strong support for spot goods, with steel mills determined to hold prices firm. Combined with implemented mid-month maintenance-driven production cuts and delayed production resumptions at some steel mills, the industry's supply marginally tightened, underpinning a slight upward move in spot prices with manageable fluctuations. From the cost and profit perspective, raw material prices showed structural divergence this week, and a recovery in steel product prices drove a minor repair in steel mill profits. On the raw material side, high-grade NPI trading activity picked up and prices rose, high-carbon ferrochrome prices weakened, and stainless steel scrap prices remained steady. Overall raw material costs experienced mild fluctuations. Combined with a slight increase in spot product prices, this effectively offset some of the pressure from raw material fluctuations, driving a modest expansion in stainless steel mill profit margins. Overall, macro sentiment swung back and forth this week, triggering wild swings in the futures market. Supply contraction expectations supported spot resilience, and the divergence between futures and spot markets became pronounced. End-user transactions were entirely dependent on futures sentiment, while off-season demand resilience was insufficient and gradually weakened. The structural divergence of raw materials helped steel mill profits recover slightly, providing some support to industry production. In the short term, the market remains dominated by macro expectations, with frequent futures fluctuations, while spot prices held relatively steady, supported by supply. Going forward, key focus areas include US Fed policy expectations, the fluctuation pace of SS futures, the sustainability of downstream transactions, and the progress of steel mill maintenance and production resumptions.