Supply-demand weak balance pattern unchanged, steel prices continue to consolidate at lows [SMM Steel Industry Chain Weekly Report]

Forecast for next week: Supply-demand weak balance pattern unchanged, steel prices continue to consolidate at lows

This week, ferrous metals trended weakly overall, with slight divergence among varieties. On the raw material side, iron ore was constrained by high port inventories and weak demand, remaining in the doldrums overall; 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 hot-rolled coil futures consolidated on a subdued note. In the spot market, construction materials benefited from the resumption of normal construction pace at sites after the holiday, with procurement volume increasing and apparent demand rising significantly WoW. Spot prices followed the decline to a relatively limited extent, and some markets saw rebar specification shortages, providing strong price support; hot-rolled coil was relatively more pressured by 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 has expectations for a slight rebound, but ore prices remain suppressed by inventories, with limited upside, and may continue to consolidate. After the second round of coke price cuts took effect, coke producers fell back into losses or hovered near break-even, suppressing production willingness. Steel mill profitability recovery remains limited, with no concentrated production resumptions yet, leaving coke demand without incremental room. The tug-of-war between sellers and buyers intensifies, and spot prices may 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 supply-demand perspective, on the supply side, steel mills have expectations for slight production increases amid raw material price concessions; on the demand side, construction sites still have some rigid purchase needs, but considering the upcoming temperature drop in northern regions, coupled with weak performance in automobiles and home appliances, overall demand growth is relatively limited. In summary, the current weak supply-demand balance pattern for steel remains unchanged, and steel prices may continue to consolidate at lows next week.

Iron ore: Hot metal production hits bottom in stages, ore prices expected to stop falling and stabilize next week

This week, iron ore remained in the doldrums, with the most-traded I2701 contract falling for four consecutive trading days, hitting a low of 667 yuan/mt. Cumulative decline from before the holiday (September 30) was 31 yuan. Qingdao Port spot prices pulled back in tandem, with futures and spot weakening in resonance. Fundamentals showed a pattern of reduced supply and weak demand: on the supply side, global shipments retreated from highs and domestic arrivals declined for three consecutive weeks, but the first post-holiday port data showed SMM 35-port inventories increased to 148.3 million mt, with inventory buildup of 2.85 million mt compared to pre-holiday levels, significantly expanding the buildup pace; on the demand side, SMM survey of 242 steel mills showed daily average hot metal production fell to 2.352 million mt, down 36,200 mt from pre-holiday levels. This week's impact from blast furnace maintenance expanded to 1.9011 million mt, increasing for three consecutive weeks, with hot metal at a staged low. Looking ahead to next week, as steel mill profits recover and blast furnace maintenance wraps up in stages, hot metal production is expected to hit bottom and rebound slightly, providing some support to ore prices. However, expectations for future supply growth remain strong, and mounting inventory pressure will continue to cap upside, while falling ocean freight rates further weaken cost support.Overall, ore prices lack upward drivers and are expected to move sideways in the short term. In terms of trading, selling on rebounds is preferred, with focus on steel demand and sentiment impact from macro news.

Coke: Coke-steel tug-of-war intensifies, coke market likely to remain in the doldrums next week

Key points: On the news front, Friday saw reports that the first round of coke price hikes of 50-55 yuan/mt would be proposed next Monday, offsetting the third-round price cut rumors at the start of the week. On the supply side, coke production continued to rebound, with previously suspended or restricted coke producers basically resuming production. Although independent coke producers in Shanxi and Hebei main producing areas have corresponding production restriction arrangements, implementation pace varies, and actual production cut effects are limited. Currently, most coke producers are back in losses, in-factory inventory continues to increase, and willingness to cut production to protect prices has risen. On the demand side, steel mill procurement remains cautious overall, with low acceptance of high-priced coke. Steel mill profitability is weak, production is at a loss, and procurement is only as needed. Steel mill operations have shifted from pushing for lower prices to actively reducing volumes. For coking coal, this week saw accelerated production resumption in Shanxi, with mines previously suspended due to working face relocation and safety issues gradually resuming operations. Meanwhile, negative feedback from steel mills continues, creating bearish pressure on coking coal. However, constrained by safety inspections and underground conditions, most operating mines have limited supply growth. Structural shortages exist for premium coking coal varieties, Mongolian coal inventories are low, and winter stockpiling expectations provide support to coking coal prices.In summary, short-term coking coal spot prices are expected to consolidate at lows. Overall, steel mill hot metal production has stabilized at low levels, providing basic rigid demand support for coke, but steel mill procurement control continues to suppress demand. The coke-steel tug-of-war intensifies, and the short-term coke spot market may remain in the doldrums.

Steel scrap: Steel mill inventories accumulate passively, prices likely to consolidate on a weak note

On the supply side, most yards resumed normal operations after the holiday. As steel prices continued to consolidate at lows, steel scrap processing bases increased shipments to avoid risks, and steel mill arrivals were favorable. On the demand side, with two rounds of coke price cuts and iron ore consolidating on a subdued note, hot metal costs continued to decline. Blast furnace steel mill per-ton profitability continued to recover, and raw material steel scrap procurement sentiment remained relatively stable; EAF steel mill profits mostly remained above break-even, with some mills extending operating hours or resuming production, keeping steel scrap demand moderate.Overall, although steel scrap demand shows strong resilience, current arrivals exceed demand, steel mill inventories are accumulating passively, and short-term steel scrap prices may maintain a weak consolidation pattern.

Rebar: Specification shortages in some regions, bottom prices have strong support
This week, rebar prices consolidated on a subdued note, but some markets saw specification shortages, keeping bottom prices relatively firm. On the supply side, blast furnace steel mill profitability recovered slightly, and with some mills completing temporary maintenance during the holiday, production resumed normally this week, with output rebounding significantly. Additionally, post-holiday EAF steel mills found steel scrap easier to purchase than before, and with profitability maintained, some mills extended operating hours, leading to a slight increase in overall EAF production. On the demand side, post-holiday downstream restocking demand was gradually released, but some northern markets are gradually entering winter, with terminal procurement enthusiasm declining, making the sustainability of demand release difficult to guarantee. On the inventory front, both in-factory and social inventories saw significant destocking this week. Downstream construction resumed normal operations, steel mill direct supply demand improved, and agents accelerated purchases to replenish tight specifications. It is understood that specification shortages currently exist in Henan, Fujian, Shandong, and other regions. Local steel mills have expectations for production increases in the short term, but before specifications are replenished, spot prices show strong resistance to declines.Looking ahead, supply-demand fundamentals are temporarily in a weak balance phase, with limited upward and downward drivers. Market trading sentiment remains influenced by raw material news. Spot prices are expected to remain in a narrow fluctuation pattern next week.

Hot-rolled coil: Costs loosening, coil prices expected to continue consolidating next week

This week, hot-rolled coil prices consolidated on a subdued note, with similar performance in the spot market. Mainstream quotations fluctuated narrowly by 10-30 yuan/mt during the week, with overall weak trading sentiment. Downstream purchased as needed, and speculative locking willingness was poor. From a fundamental perspective, on the supply side, this week's hot rolling maintenance impact was 193,800 mt, up 53,400 mt MoM, but next week's maintenance impact is expected to fall back to 144,900 mt, and production rebound pressure still needs attention. On the demand side, post-holiday downstream demand was mainly rigid restocking. The automobile and home appliance industries remained weak overall, while the machinery industry barely held up. This week's apparent demand for hot-rolled coil rebounded by 356,300 mt MoM, basically offsetting the previous decline of 336,400 mt, marking the first clear positive feedback after the holiday. However, transmission of demand to physical workload remains slow, and terminals show low acceptance of high-priced resources. On the cost side, most steel mills remain at a loss, with cost declines and expectations for production cuts jointly limiting deep downside space.In summary, the supply-demand imbalance in hot-rolled coil is marginally easing, but high inventories and loosening cost support continue to pressure prices. The most-traded contract is expected to run in the 3,200-3,270 yuan/mt range next week, continuing to consolidate.

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