[China Export Price Weekly Review and Outlook]

Ferrous metals mostly showed a first-up-then-down trend, yet still posted certain gains MoM overall, with coking coal and coke leading the gains and finished steel following higher. The core driver of the rally was a confluence of bullish factors: first, supply-side disruptions in coking coal dominated, as Shanxi production resumptions fell severely short of expectations and supply remained tight, with mines holding back from selling and auctions closing at high premiums, quickly materializing the cost-push logic; second, cost support moved up in steps, as the fourth coke price hike was implemented on September 3, iron ore coarse fines saw destocking for two consecutive weeks, and news of the Minas mine suspension boosted ore prices higher, while hot metal output rebounded to a daily average of 2.408 million mt, keeping demand-side support for raw materials intact. After the early-week gains, the China-Mongolia heads-of-state meeting saw an exchange of views on border port railway construction and other issues, raising market concerns that Mongolian coking coal supply may gradually recover, which stalled the rise in coking coal and coke futures and dragged other ferrous metals into a pullback. From a data perspective, as spot cargo remained weak and the follow-through rally was not strong, HRC spot prices in US dollar terms rose $10/mt MoM, sheets & plates export prices rose $5-6/mt, long steel prices rose $7-8/mt MoM, and export margins continued to narrow.

Looking ahead, the market is expected to maintain a cost-driven firm pattern in the short term, but risks of a retreat after rapid rise are building. Coking coal production resumptions are falling short of expectations and tight supply is hard to resolve, keeping cost support solid; after the coke price hike took effect, the tug-of-war between coke and steel intensified, with coke producers limiting production and holding back from selling amid losses while steel mills pressed for deliveries. If this continues, the cost center will keep shifting higher. Focus should be on the pace of coking coal production resumptions and marginal changes in end-user transactions. Export prices are also expected to stay high on the basis of this week's levels.