Industry updates indicate that China's official manufacturing Purchasing Managers' Index (PMI) for May reached 51.8, marking a sixth consecutive month of expansion while inflationary pressures have eased.

Additionally, reports from Iranian media suggest the country may suspend indirect communications with the United States and plans to completely block the Strait of Hormuz in protest of Israeli military actions in Lebanon. Iran's Supreme Leader's military advisor stated that Iran's patience is limited and it will not allow the maritime blockade to continue. Concurrently, former U.S. President Trump noted that negotiations with Iran are progressing rapidly, with a potential agreement to extend the ceasefire and reopen the Strait of Hormuz possibly being reached within a week. The Lebanese President's office announced that Hezbollah has committed to halting strikes against Israel, though the Israeli Prime Minister stated that military operations in southern Lebanon will continue as planned.

In the United States, the May ISM Manufacturing Index exceeded expectations, rising to 54, hitting a four-year high and indicating expansion for the fifth consecutive month.

Market Analysis and Outlook

On the raw materials front, while the rainy season in the Philippines has concluded, the grade of nickel ore has declined. Nickel ore port inventories are lower year-on-year, leading to tight raw material supplies for domestic nickel-iron plants in China. Furthermore, Indonesia's planned significant reduction in RKAB quotas for next year, coupled with an increase in the HPM formula benchmark coefficient for 1.6% grade nickel ore to 30%, is expected to contract raw material supply. This will elevate nickel ore production costs and subsequently raise the overall cost baseline for the industry.

From a supply perspective, production profits for stainless steel mills have improved somewhat. However, with rising nickel-iron prices, cost support is gradually shifting upward. Although mill profit margins have expanded, the industry is entering the traditional seasonal demand lull, which will likely limit any significant increase in stainless steel mill production schedules.

Regarding demand, the market is in a traditional inventory destocking cycle. Recent price corrections in steel have improved purchasing sentiment in downstream markets. Spot market premiums remain high, and inventory continues to be drawn down at a steady pace.

Technically, the market is seeing increased open interest alongside rising prices, suggesting a slight strengthening in bullish sentiment.

Summary of Viewpoint

The outlook suggests stainless steel futures prices are likely to adjust with a firm bias. Key support to monitor is at the M10 level.