[SMM Stainless Steel Daily Review] SS futures hold up well in a narrow range, while stainless steel spot demand is weak and traders offer discounts to sell.

According to SMM on June 22, SS futures showed a narrow-range doldrums pattern amid a relatively strong stance. SHFE nickel opened low and moved higher, lifting SS in tandem. However, market sentiment remained cautious, narrowing the overall fluctuation range. As of the midday close, the most-traded SS contract settled at 15,125 yuan/mt. In the spot market, despite the relatively firm SS futures, cautious sentiment dominated and offers were largely stable. Coupled with the onset of the off-season for consumption, demand was weak. Inquiries and trading were sluggish, and some traders actively sold to reduce inventory, leading to some discounting.

The most-traded SS futures contract. At 10:15 a.m., SS2608 was at 15,085 yuan/mt, up 25 yuan/mt from the previous trading day. Spot premiums for 304/2B in Wuxi ranged from 135 to 535 yuan/mt. In the spot market, the average price for Wuxi cold-rolled 201/2B coil was flat. For cold-rolled unedged 304/2B coil, the average price in Wuxi was flat, and the average price in Foshan was flat. The price for Wuxi cold-rolled 316L/2B coil was flat. For hot-rolled 316L/NO.1 coil, Wuxi quotes rose 100 yuan/mt. Cold-rolled 430/2B coil prices remained stable in both Wuxi and Foshan.

This week, stainless steel futures and spot markets swung wildly. Macro expectations outside China repeatedly disturbed futures, intensifying the tug-of-war between longs and shorts. Overall, the market was characterized by macro-driven futures movements, sentiment-sensitive trading, supply tightening supporting spot prices, stable inventories, and minor profit recovery. Early in the week, macro tailwinds boosted sentiment, and a futures rebound drove a recovery in spot trading. Mid-week, hawkish expectations from the US Fed intensified, weakening futures again and making end-user procurement more cautious. Supported by steel mills holding prices firm and marginal supply contraction, spot prices edged up with limited fluctuations, showing a notable divergence between futures and spot markets. On the futures side, this week’s moves were entirely driven by macros outside China, with futures generally rising first before pulling back. Early in the week, de-escalation of the US-Iran geopolitical conflict, combined with weaker-than-expected US core CPI data, fueled expectations of easing inflation, driving the nonferrous metals complex higher. SS futures rebounded accordingly, repairing prior weakness. However, mid-week, the US Fed meeting signaled a hawkish stance, reigniting rate hike expectations and quickly erasing macro tailwinds. Risk-off sentiment rose, dragging SS futures to a pullback and an overall trend of weakness in the doldrums. In spot and inventory markets, spot trading was highly correlated with futures moves this week, with clear periods of divergence. Early in the week, firmer futures spurred concentrated end-user restocking, and trading volumes surged. Mid-week, when futures weakened, wait-and-see sentiment grew, and trading swiftly turned sluggish. This week, overall social inventory of stainless steel was largely stable. The supply side provided strong support for spot prices. Steel mills were determined to hold prices firm. Together with monthly maintenance and production cuts taking effect and some mills delaying production resumptions, industry supply tightened marginally, underpinning a slight uptick in spot prices while keeping fluctuations manageable. Cost and profit side, raw material prices saw structural divergence this week, with finished steel prices recovering and boosting a slight recovery in steel mill profits. Raw material side, transaction activity for high-grade NPI picked up and prices rose, high-carbon ferrochrome prices weakened, stainless steel scrap prices held steady, so overall raw material costs experienced mild fluctuations. Combined with a slight rise in spot finished steel prices, this effectively offset part of the pressure from raw material fluctuations, driving a slight expansion in stainless steel mill profit margins. Overall, macro sentiment swung wildly this week, triggering wild swings in futures. Expectations of supply contraction supported spot resilience, and the market showed a prominent divergence between futures and spot. End-user transactions were entirely dependent on futures sentiment, and off-season demand resilience was insufficient and gradually weakened. The structural divergence in raw materials aided a slight recovery in steel mill profits, providing some support for industry production. In the short term, the market remained dominated by macro expectations, futures fluctuated frequently, and spot prices, supported by supply, maintained a relatively stable trend. Going forward, key focuses will be on 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 on the ground.