Forecast for Next Week: No Trending Market for Ferrous Metals Before the Holiday
This week, ferrous metals fluctuated weakly. Mid-week, coking coal and coke saw a temporary rise. At the beginning of the week, financial markets experienced severe fluctuations, leading to a pessimistic sentiment in the ferrous chain, with futures pulling back; mid-week, due to Indonesia cutting coke production quotas, coking coal and coke led the gains, but the impact was more significant on thermal coal, while coking coal mainly followed suit emotionally, with limited sustainability; in the latter part of the week, finished steel continued its seasonal inventory buildup, and at the same time, support from the raw material end weakened, causing the ferrous chain to pull back collectively. In the spot market, as the long Chinese New Year holiday approaches, market procurement activities have further slowed down, with only a small amount of just-in-time procurement at lower prices by end-users.
In the short term, according to SMM's survey, the daily average hot metal increased 21,000 mt WoW this week, but steel mills have basically completed their pre-holiday restocking, providing limited support from the raw material end; regarding steel, as terminal demand gradually enters the holiday state, the supply-demand imbalance continues to accumulate, and next week, demand will weaken further, accelerating the rate of inventory buildup. Overall, the current drivers for the ferrous chain are limited, and before the holiday, it will continue to follow the sentiment of capital, maintaining a sideways movement.
Iron Ore: Pre-Holiday Stockpiling Ends, Imported Ore Prices to Continue Consolidating at Lows Next Week
This week, iron ore prices continued their downward trend, with futures hitting bottom. For port spot cargoes, constrained by high inventories and low demand, spot prices also lacked support, with the weekly average price of PB fines at Shandong ports falling 8 yuan/mt WoW, and the overall market remaining in the doldrums. Looking ahead to the imported ore market next week, on the demand side, some steel mills still have plans to resume production, and hot metal production is expected to continue to rebound slightly. However, as the Chinese New Year approaches, steel mill restocking has ended, and market transactions are sluggish. In terms of supply, over the weekend, a new cyclone will affect Australian port shipments, and Australia's shipments are expected to decline next week. Additionally, affected by the decrease in January shipments, February iron ore arrivals are also expected to see a slight reduction. However, given the currently high inventory levels, a temporary drop in supply offers limited support to prices. Under the combined influence, SMM expects iron ore prices to continue fluctuating at the bottom next week.
Coke: Slightly Looser Supply-Demand Structure, Market Prices May Stabilize Next Week
In terms of supply, coke sales have been hindered, and most enterprises are still experiencing minor losses, leading to a decrease in operating levels and a reduction in coke supply. On the demand side, there has been an increase in maintenance and production cuts at steel mills, and with coke inventories at steel mills at relatively high levels, they are maintaining just-in-time procurement of coke. From the perspective of raw material fundamentals, as the Chinese New Year approaches, the number of suspended coal mines continues to increase, tightening coking coal supply, and downstream procurement enthusiasm has also declined, with fewer new orders for coking coal and weaker online auction sentiment. However, the inventory pressure on coking coal at coal mines is relatively small, and there is a strong willingness to hold prices firm, so in the short term, coking coal prices may remain in the doldrums. Overall, the coke supply-demand structure appeared slightly loose, and the coke market is expected to operate steadily next week.
Steel Scrap: Chinese New Year Production Halts Hit, Weak Supply-Demand Dynamics Persist
Supply side, as the Chinese New Year holiday approaches, steel scrap processing bases have successively suspended operations, with frontline recycling and processing workers returning home early, leading to a notable reduction in scrap output and circulation. Demand side, electric furnace mills have successively issued notices to halt scrap purchases during the holiday, with procurement windows closing rapidly, resulting in a significant decline in scrap demand. Overall, driven by the holiday production halt wave, market transactions were sluggish, overall liquidity dropped substantially, and the weak supply-demand pattern is expected to continue, with scrap prices likely to fluctuate rangebound.
Rebar: Market Largely Semi-Stagnant, Price Fluctuations Moderate
This week, rebar prices mainly consolidated weakly, with the nationwide average price at 3,140 yuan/mt, down 16 yuan/mt WoW. Supply side, some electric furnace mills have begun annual maintenance this week, and other mills will gradually schedule holidays next week, with operating rates expected to hit the year’s lowest level. Blast furnace steel mills recently saw declining profit margins, resulting in modest enthusiasm for producing construction steel; additionally, some mills did not conduct winter stockpiling, and hot metal was diverted to sheets & plates, leading to a slight drop in production this week. However, some mills are set to resume production after completing rolling line maintenance in February, and daily average planned rebar production is expected to increase. Demand side, many markets were already in a semi-holiday state this week, with project sites largely shut down. It is understood that most downstream construction sites will resume work after the Lantern Festival, and normal procurement will generally begin in March. Inventory side, both mill and social inventories are in a seasonal buildup phase, with the accumulation rate slightly higher YoY in lunar terms. However, considering that winter stockpiling this year fell short of previous years, post-holiday inventory pressure is relatively manageable. Overall, as the market has gradually entered the holiday period, price fluctuations have moderated, and prices are expected to largely maintain previous levels next week.
HRC: Shipment Sentiment Worsens Approaching Chinese New Year, Downstream HRC Prices Expected to Move Sideways
This week, HRC futures moved sideways, with the most-traded contract closing at 3,251, down 0.43% on the day. Spot market prices fell 10-20 yuan/mt WoW; as the Chinese New Year neared, trading sentiment weakened during the week, and overall shipments were poor. On the news front, the main upward driver for HRC prices this week came from Indonesia’s cut in coke production quotas, which led coke to lead gains and subsequently lifted HRC sentiment, though the impact was clearly limited and soon faded. Fundamentally, the impact from maintenance on HRC this week was 274,500 mt, up 12,000 mt WoW, and prices are expected to fluctuate rangebound with no significant changes before the holiday. Meanwhile, year-end end-use demand for finished steel weakened further, with most engineering projects winding down and shutting down successively, warehouses mostly closing around Minor New Year, and traders’ shipments gradually halting. Inventory performance, although the total volume was high on a YoY basis, the accumulation rate aligned with the seasonal pattern, and the cost side also mostly remained in the doldrums with short-term fluctuations. Therefore, overall, coil prices are expected to continue fluctuating next week, with the most-traded contract focusing on the 3,220-3,300 range.
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