DONG-YU Market Radar - Nickel Weakness Does Not Mean Stainless Steel Will Collapse
Overnight metal markets mostly closed lower, with nickel continuing its pullback as LME nickel slipped to USD 18,955/MT while SHFE nickel also moved downward under profit-taking pressure.
At first glance, the market appears weak.
However, experienced stainless steel traders understand that the current market is no longer driven by nickel prices alone.
The more important signal now lies in the growing divergence between regional inventories, raw material sentiment, and actual downstream purchasing behavior.
Recently, domestic Chinese nickel inventories have continued to rise sharply, with SHFE nickel stocks climbing above 84,000 tons. Meanwhile, LME nickel inventories have started to decline from recent highs, creating a rare inventory divergence between domestic and overseas markets.
This is a critical signal.
It suggests that while Chinese domestic demand remains sluggish, overseas supply circulation is gradually tightening. In other words, the market weakness currently observed is more concentrated within local sentiment and seasonal demand pressure rather than a complete collapse in global stainless steel fundamentals.
On the raw material side, the end of the Philippine rainy season has improved nickel ore shipment flows, pushing raw material sentiment slightly softer. At the same time, Indonesia’s latest export control discussions have notably excluded NPI (Nickel Pig Iron), meaning the short-term supply structure for stainless steel feedstock remains relatively stable.
This explains why the stainless steel market is weakening slowly rather than entering a panic-driven correction.
From a trader’s perspective, June now represents a classic “psychological standoff” phase.
Buyers expect lower prices due to seasonal weakness and softer nickel performance, while mills remain reluctant to aggressively cut prices because overall production costs, cash flow pressure, and inventory structures are still manageable for major producers.
As a result, the market is entering a narrow-margin negotiation cycle:
Buyers hesitate to restock aggressively.
Mills resist deep discounts.
Transactions become highly selective.
High-priced resources face increasing resistance.
This is already visible in the current stainless steel spot market, where hot rolled offers have started adjusting downward while cold rolled prices remain relatively stable.
Another important variable is energy.
Recent optimism surrounding a possible extension of the Iran-related ceasefire discussions has pushed crude oil prices lower amid expectations that the Strait of Hormuz may remain operational without disruption.
If energy prices continue softening, stainless steel production costs could lose another layer of support in the coming weeks.
However, the key risk for buyers is assuming that weaker nickel automatically guarantees significantly cheaper stainless steel prices.
Historically, during low-demand periods, stainless steel prices often become less sensitive to nickel fluctuations and more dependent on:
mill production discipline,
inventory pressure,
regional supply availability,
and shipment lead times.
In other words, lower nickel does not necessarily mean lower replacement cost opportunities for every specification.
For stainless steel buyers, the current market may not be the right moment for aggressive speculation, but it is also not the ideal phase to remain completely uncovered.
The market is entering a period where supply chain stability may once again become more important than chasing the absolute lowest number.
And in weak markets, execution capability often matters more than headline pricing.
