Weak supply-demand balance remains unchanged, steel prices to consolidate at lows

This week, ferrous metals consolidated on a subdued note overall, with slight divergence among products. On the raw material side, iron ore was in the doldrums, constrained by high port inventory and weak demand. For coking coal and coke, coke spot prices fell under pressure, with the second round of price cuts officially implemented mid-week. On the finished steel side, rebar and HRC futures consolidated on a subdued note. In the spot market, construction steel benefited from the resumption of normal construction pace at sites after the holiday, with procurement volume increasing and apparent demand up notably WoW. Spot prices followed the decline to a relatively limited extent, and some markets saw rebar specifications in short supply, providing relatively strong price support. HRC, however, was under more evident pressure due to weak manufacturing demand and slower post-holiday inventory destocking.

Looking ahead to next week, on the raw material side, for iron ore, hot metal production is expected to rebound slightly, but ore prices remain suppressed by inventory, leaving limited upside and likely sideways consolidation. After the second round of coke price cuts, coking plants have fallen back into losses or are at the breakeven point, dampening production willingness. Steel mills have seen limited margin recovery and have not yet shown concentrated production resumptions, leaving coke demand with little room for growth. The tug-of-war between sellers and buyers is intensifying, and spot prices are likely to remain stable. On the finished steel side, Q4 fiscal incremental policies have been implemented, but the actual boost to steel demand still needs to be transmitted. From a fundamental perspective, on the supply side, steel mills have slight expectations for production increase amid raw material price concessions. On the demand side, construction sites still have some rigid procurement needs, but considering the upcoming temperature drop in northern regions, coupled with subdued performance in sectors such as automobiles and home appliances, overall demand growth is relatively limited. In summary, the current weak supply-demand balance for steel remains unchanged, and steel prices are likely to consolidate at lows next week.