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Stainless steel prices demonstrated relative strength in July compared to the typical seasonal declines observed in recent years. The market saw firmer pricing as Indonesia's proposed changes to its RKAB quota system created initial supply concerns. The potential shift from three-year to single-year nickel ore quotas raised expectations of constrained raw material availability, providing upward pressure on nickel prices that typically influence stainless steel production costs.

However, this price support proved limited as market participants recognized the substantial buffer in approved quotas, with 360 million tons already authorized against just 120 million tons consumed in the first half of the year. The ample quota availability tempered earlier bullish sentiment, though prices remained elevated from June levels as producers balanced quota utilization against annual production targets.

Supply-side factors have provided some upward pressure on prices, as regulatory efforts to curb excessive competition and phase out outdated production capacity have taken effect. Production schedules in July saw a modest decline, with output reaching 3.268 million tons, down 0.72% month-on-month and 1.22% year-on-year. This followed a similar reduction in June, where crude steel output from 43 domestic stainless steel plants fell by 3.28% month-on-month.

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Although the demand conditions have been subdued as downstream consumption slowed during the seasonal lull, the supply-side constraint buoyed the prices, overall.

Inventory levels edged lower in July, closing the month at 1.1186 million tons, a 3.3% reduction from the start of the period. Looking ahead, stainless steel production remains constrained by maintenance schedules, though the cuts have been less pronounced than anticipated.

With supply pressures persisting and demand recovery hampered by seasonal factors like extreme weather, purchasing activity has been limited to essential restocking. Traders have slightly more room for negotiation, but meaningful volume growth remains elusive. In the near term, stainless steel prices are likely to consolidate within a narrow range, balancing modest supply adjustments against tepid demand.