8.14 SMM Global Steel Daily Report

The dry-basis, tax-inclusive EXW price of iron ore concentrates in East Liaoning edged down to 860 yuan/mt. According to feedback from mines and beneficiation plants, the local price spread between domestic and imported ore is around 60 yuan/mt, while local steel mills generally have a relatively strong desire to bargain down prices and expect to narrow the spread to around 20 yuan/mt. Local mines and beneficiation plants are mostly selling as usual at steel mills' purchase prices. However, iron ore futures recently drifted higher, and the price spread between domestic and imported ore may continue to narrow. Local iron ore concentrate prices are expected to have limited downside room.

Iron ore futures traded firmer today. The DCE most-active contract I2701 settled at RMB 710.5/mt, up 0.42% from the previous session. Spot prices at Qingdao Port rose RMB 5-9/mt from the previous trading day. Traders were active in offering, while mills showed limited enquiry, leaving overall spot transaction volumes moderate as of press time.

This week, HRC prices strengthened compared with the previous week, and overall transactions improved from the previous week. Supply side, the impact from rolling-line maintenance declined WoW this week, and overall HRC production increased. Demand side, apparent demand rose WoW this week. Inventory side, total HRC inventory fell 74,000 mt WoW this week, and mill inventory rose 2,400 mt WoW. Social inventory side, SMM-tracked HRC social inventory at 86 warehouses nationwide (large sample) stood at 4.4432 million mt this week, down 76,300 mt WoW (-1.69% WoW) and up 34.48% YoY on a Gregorian calendar basis. By region, except for small inventory buildups in Central China and Northeast China, all other markets were destocking. Cost side, coking coal and coke prices showed strong performance this week, boosting HRC cost support. Looking ahead, expectations for the first round of coke price hikes remain, and combined with lingering disturbances from iron ore long-term contract negotiation news, cost support has strengthened somewhat. From a fundamentals perspective, the impact from HRC maintenance will gradually decrease going forward, and HRC production is expected to continue rebounding; on the demand side, however, downstream demand has yet to recover, and demand remains mainly rigid at a weak level. Next week, HRC inventory is expected to remain in the late-off-season inventory buildup phase, and fundamental pressure remains. HRC prices are expected to follow cost-side fluctuations next week, and the most-traded contract is expected to trade in the 3,230-3,300 range.