Forecast for Next Week: Raw Material Disruptions Continue to Affect Ferrous Metals Trends
This week, multiple raw material-side news items boosted market sentiment, and finished steel prices rebounded from lows in stages, showing an overall bottoming-out trend. At the start of the week, weak fundamentals of finished steel remained difficult to change, and ferrous metals prices had fallen excessively to the bottom. However, subsequently, coal mines in Shanxi were affected by rainfall, with circuit failures causing production suspensions at some mines, which sentimentally drove ferrous metals prices to bottom out and rebound. Mid-week, rumors of a 48-hour strike at BHP circulated, with limited short-term substantial impact, but sentimentally remained supportive. In the latter half of the week, production and sales data for five major steel products showed a significant decline in apparent demand for HRC and rebar, limiting fundamental support for finished steel. However, Shanxi Coking Coal held a safety production video conference emphasizing coal mine safety. Under expectations of stricter safety inspections, ferrous metals prices consolidated. In the spot market, multiple regions were affected by rainfall and high-temperature weather, slowing the pace of end-user purchases. However, stimulated by sentiment, some speculative procurement demand was released.
In the short term, according to SMM survey tracking, daily average hot metal output declined by 2,900 mt WoW. Steel mill profits continued in losses, and the impact from new maintenance at steel mills increased in August, with demand for iron ore declining. Secondly, considering the third round of coke price cuts has taken effect and the market expects a fourth round to be initiated, coke still has room to give profits on the cost side, with short-term cost support remaining weak. On the steel side, currently still in the demand off-season, inventory of long products and sheets & plates continued its accumulation cycle, and the supply-demand imbalance was difficult to alleviate. Overall, although ferrous metals prices rose driven by sentiment, after sentiment subsides, finished steel returns to fundamental trading with little support. Therefore, short-term price trends will continue to move sideways. Going forward, continue to monitor steel mill maintenance situations and raw material-side news disruptions.
Iron Ore: Bullish News vs. Weak Reality – Prices Expected to Consolidate Next Week
This week, iron ore prices bottomed out and rebounded, with the weekly average price declining WoW. On Monday, affected by bearish sentiment from last week, the most-traded contract I2609 continued to fall, leading the decline in ferrous metals. The intraday low touched 692.5 yuan/mt, hitting a new low for the year. However, as sentiment was released, short positions took profits and exited. Additionally, driven by news of long-term contract negotiations and the strike of port workers at BHP, iron ore prices bottomed out and rebounded.
Looking ahead to next week, iron ore prices may show a volatile pattern of declining first and then rising, with a gradually lifting bottom. Bullish and bearish factors are intertwined, and market tug-of-war will intensify. On the supportive side, potential supply-side disruptions still have room to develop: the union at BHP's Port Hedland plans to escalate the strike with a subsequent 24-hour action starting August 9, posing a risk of temporary port operation disruptions and potentially disturbing the short-term shipment pace. Meanwhile, Rio Tinto's long-term contract expires in August, and the progress of subsequent negotiations has entered the market's observation window, elevating the supply-side uncertainty premium. The demand side will weaken further; inventory pressure for finished steel at mills continues to accumulate, wait-and-see sentiment strengthens on the procurement side, and restocking willingness remains low. According to SMM's calculations based on the impact from blast furnace maintenance, the daily average hot metal output of mills will continue its downward trend next week, with demand-side pressure gradually escalating. Port inventories have the potential to accumulate further, capping the upside room for ore prices.Overall, ore prices are expected to consolidate next week. News disruptions may push prices upward in stages, but constrained by the weak fundamental landscape, the rebound height may be limited.
Coke: Strong Rigid Cost Support – Fourth Round of Coke Price Cuts May Be Delayed Next Week
On the news front, mainstream steel mills lowered the purchase price of coke, with a reduction of 50 yuan/mt for wet-quenched coke and 55 yuan/mt for dry-quenched coke, effective from 0:00 on August 7, 2026. In terms of supply, most independent coke enterprises are mired in losses, with strong rigid costs. Coke supply is shrinking, and coke enterprises face blocked shipments, leading to a continuous inventory buildup of coke. On the demand side, the steel market remains in the traditional consumption off-season. Combined with the impact of high temperature and rain, the scope of blast furnace maintenance at steel mills has expanded, significantly weakening the rigid demand for coke. On the coking coal side, constrained by safety inspections, safety requirements, and earlier checks on overproduction, the operating rates at most producing coal mines remain at low levels, limiting coking coal supply. Online auction sentiment has clearly stabilized, with the failure rate remaining low, and market sentiment has been repaired. However, affected by steel mill losses and production restrictions at coking enterprises, coking coal prices are unlikely to rise in the short term and may continue to operate stably for now.In summary, the coke market may continue to operate weakly in the short term, but there is a possibility of delaying price cuts.
Steel Scrap: Weak Equilibrium Difficult to Break in Short Term – Prices May Continue to Consolidate
Supply side, currently affected by high temperatures in most regions, the efficiency of outdoor demolition, bulk material collection, and yard operations has declined. Combined with ongoing constraints on steel scrap circulation due to tax invoice issues, social recycling volume of steel scrap remains low. Demand side, steel mill profits are under pressure, and hot metal costs have shifted downward, weakening blast furnace steel mills' willingness to use scrap. In the traditional off-season for steel demand, EAF steel mills face high shipment pressure, with some electric furnace plants continuing to reduce operating hours or shut down. Scrap procurement mostly maintains a "small volume as needed" pace.Overall, the current market is in a stalemate mode where upside lacks drivers and downside has cost and supply support. Both bulls and bears are cautious, and steel scrap prices are expected to continue moving sideways in the short term.
Rebar: Strong Sentiment Drives Prices to Stop Falling and Rebound – But Weak Reality Landscape Difficult to Change
This week, rebar prices bottomed out and rebounded in stages. The current nationwide average price is 3,034 yuan/mt, down 18 yuan/mt from last Friday. Supply side, some mills face high inventory pressure and risk of negative cash flow, so the impact from maintenance at steel mills increased this week, and the supply side continued to see reductions. Meanwhile, EAF steel mills' profitability has not improved. Coupled with difficulties in collecting scrap in some regions, some mills continue to reduce operating hours, and some even have plans for temporary production suspension and maintenance. Therefore, the operating rate of electric furnace plants will drop to a medium-to-low level for the year in August. Demand side, affected by rainy weather in central and northern China this week, construction progress of end-user projects was constrained, and transaction performance was weak. However, procurement at projects in east China increased, and demand improved slightly. Overall, nationwide demand remained in a sluggish off-season phase. On the inventory front, mill inventory and social inventory continued to diverge this week. With production declining, mill inventory still saw slight destocking, while social inventory continued its accumulation trend, but the overall pace of inventory buildup slowed down.Going forward, the market's weak reality landscape is difficult to change. Short-term trading continues to revolve around strong sentiment-driven trends, coupled with frequent news disruptions from the raw material side. Spot prices are expected to still have the possibility of rising in stages, but later on, after the sentimental impact subsides, a return to finished steel fundamentals will temporarily struggle to support price stability.
HRC: Fundamental Imbalances Exist – But Cost Support Remains – HRC Prices May Swing Wildly Next Week
This week, HRC prices declined first and then rose, overall strengthening, with transaction performance gradually warming up. In terms of supply, rolling line maintenance increased this week, leading to a slight decline in overall HRC production. On the demand side, HRC apparent demand improved this week but remained weak overall. High temperature and rain continued to drag on downstream operations, off-season sentiment remained unchanged, and weak demand was difficult to alter in the short term. On the inventory front, SMM's statistics showed that HRC social inventory across 86 warehouses nationwide was 4.5196 million mt, up 42,200 mt WoW, or up 0.94% WoW. By region, except for narrow declines in northeast and south China markets, other markets continued to build inventory, but the pace slowed down. Going forward, the fourth round of coke price cuts may be delayed, iron ore prices have upward expectations, and cost support for HRC remains. But with poor off-season demand, supply-demand imbalances continue to accumulate, suppressing HRC prices and lacking upward momentum.In summary, the most-traded HRC contract is expected to move in the 3,190-3,290 range next week, with wild swings.
*The views in this report are based on market-collected information and the comprehensive assessment of the SMM research team. The information provided in the report is for reference only, and risks are borne by the user. This report does not constitute direct advice for investment research decisions. Clients should make decisions cautiously and not use this as a substitute for independent judgment. Any decisions made by clients are unrelated to SMM. Additionally, any losses and liabilities arising from unauthorized or illegal use of the views in this report are unrelated to SMM.
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