[SMM Hot Topic] April Hot-Rolled Coil Prices May Rise First and Then Weaken

• Cost Strength Drove a Narrow Rise in the Average Spot Price of Hot-Rolled Coil in March

As of March 30, the closing price of the most-traded hot-rolled coil contract was 3,307. In March, the SMM national average spot price of hot-rolled coil was 3,265.93 yuan/mt, with the monthly average price up 0.72% MoM.

Hot-rolled coil prices edged up in March, mainly due to factors including the Middle East conflict, which pushed up ocean freight rates and lifted ore prices, as well as stronger coking coal prices driven by the energy substitution logic.

• April: Key Events Such as the Middle East Conflict and Long-Term Iron Ore Contract Negotiations Still Warrant Attention for Hot-Rolled Coil Price Trends

Fundamentals side, affected by environmental protection-driven production restrictions in March, multiple steel mills conducted equipment maintenance or reduced-load production. SMM's average weekly hot-rolled coil production was 3.1739 million mt, down 1.47% MoM. As this round of maintenance concludes, hot-rolled coil production is expected to rebound around 1.5-2% MoM in April.

Demand side, the average apparent demand for hot-rolled coil tracked by SMM in March was 3.1586 million mt, rebounding 18.91% MoM and down 8.44% YoY. Constrained by weak new orders in some downstream industries and the return of supply to China due to softer hot-rolled coil exports, apparent demand for hot-rolled coil remained below the same period in previous years. Apparent demand for hot-rolled coil is expected to rebound by around 2% in April, while still remaining slightly below the same period in previous years.

Supply and demand for hot-rolled coil are expected to rebound simultaneously in April, with inventory continuing to decline slowly; in addition, given that the high inventory of hot-rolled coil warrants still formed a drag, fundamentals were unlikely to provide strong support.

Overall, entering April, steel fundamentals themselves only improved marginally. The trading center still needed to focus on when the Middle East conflict would end and when the CM&BHP negotiations would be finalized. The market currently expected the Middle East conflict to likely wind down in mid-to-late April. Hot-rolled coil prices are expected to strengthen first and then weaken in April. Affected by repeated fluctuations driven by key events, hot-rolled coil prices are likely to achieve a phased upward breakout, and the average price in April may rise slightly by 10-20 yuan/mt from March.