Forecast for Next Week: Ferrous Metals to Fluctuate at Highs in the Short Term
After the holiday, ferrous metals opened higher, but subsequent trends diverged—finished steel and iron ore fluctuated at highs, while coke surged before pulling back. The strong rally during the week was mainly driven by overseas disruptions: during the holiday, US-Iran tensions escalated with widening negotiation gaps, pushing raw materials to lead the gains in ferrous metals. Combined with post-holiday capital inflows, prices were notably driven up. In the latter half of the week, market rumors suggested Iran and the US had reached a consensus on easing the US naval blockade in exchange for the gradual reopening of the Strait of Hormuz, and bears increased their positions in coke. Data on the five major steel products showed weakness on both supply and demand sides, with no inventory buildup after the holiday. Spot market side, traders had a strong desire to hold prices firm, and both futures and spot purchases were made at low prices.
In the short term, according to SMM survey tracking, some steel mills recently added annual maintenance plans. Daily average hot metal production fell by 9,800 mt WoW this week, but steel mill profitability remained moderate, and hot metal production is still expected to rebound from low levels going forward. The third round of coke price increases is in a negotiation phase. Meanwhile, considering the uncertain overseas situation, short-term cost support still exists. Steel side, end-users resumed normal procurement after the holiday, inventory will continue to decline, and short-term imbalances are unlikely to emerge. Overall, current ferrous metals market sentiment is relatively warm. With the uncertain overseas situation and elevated prices outside China, ferrous metals are likely to stay high in the short term with limited upside and downside, and attention should be paid to domestic demand performance going forward.
Iron Ore: Prices Continued to Surge on Macro Stimulus, Pullback Risk Increases Next Week
Iron ore prices opened high and trended higher this week, with the most-traded contract hitting a new high since H2, supported by fundamentals and macro stimulus. Spot side, port inventory remained at high levels with ample supply of mainstream cargoes. Steel mills' strong desire to bargain down prices suppressed the gains in port spot prices, causing spot prices to follow the rally slowly. Taking Shandong ports as an example, the average price of PB fines at Qingdao port rose only 20 yuan/mt WoW.
Looking ahead to next week, based on SMM blast furnace maintenance data, hot metal production is expected to continue declining slightly next week. Meanwhile, as incremental supply is gradually released, port arrivals will increase notably, and port inventory may show an inventory buildup trend, with supply-demand imbalance intensifying, which will weigh on ore prices. However, macro perspective still provides sentiment support—reports suggest both the US and Russian presidents have plans to visit China, and market expectations remain optimistic. From an industry data perspective, current steel demand is relatively robust, inventory destocking is progressing well, and overall supply-demand imbalance is not prominent. In summary, iron ore prices are expected to hover at highs with a fluctuating trend next week.
Coke: The third round of price increase remains in a negotiation phase, and the market may be generally stable with slight rise next week
In terms of supply, coking enterprises still maintained profitability with moderate production enthusiasm, supply was stable with slight increases, and shipments were smooth, with current coke inventory at coking enterprises remaining at a relatively low level. On the demand side, finished steel prices rose recently, steel mill profits increased, daily average hot metal output remained at a relatively high level, and steel mills' demand for coke was relatively firm. On the coking coal side, most coal mines maintained stable production with steady supply. After the holiday, downstream coking and steel enterprises slowed down their purchase pace, with their own coking coal inventory at reasonable levels. Market transaction activity declined somewhat, but most coal mines maintained low inventory levels with relatively small pressure on shipments. In summary, the third round of coke price increase remains in a negotiation phase, and the coke market may be generally stable with slight rise in the short term.
Steel Scrap: Weak supply-demand pattern, short-term market to move sideways
On the supply side, affected by multiple factors including holiday production shutdowns, tight upstream invoice supply, and tightened tax invoice regulatory policies, steel scrap market resource circulation pulled back, social inventory remained at low levels, and overall arrivals at recycling bases were relatively weak. On the demand side, mainstream steel mills maintained a stable production pace, daily steel scrap consumption was basically flat compared to pre-holiday levels, but the cost-effectiveness of steel scrap remained inferior to hot metal, leading to weak purchasing enthusiasm among steel mills, with overall procurement mainly focused on restocking as needed. Overall, the current steel scrap market presented a pattern of weak supply and demand, and the short-term market is likely to maintain a narrow-range sideways movement.
Rebar: Post-holiday restocking demand released, but beware of phased pullback risks
Rebar prices moved up significantly this week, with the nationwide average price at 3,274 yuan/mt, up 73 yuan/mt WoW from pre-holiday levels. On the supply side, some steel mills in east China underwent planned maintenance this week, but rolling lines in north China and southwest China resumed production, resulting in a slight increase in overall production. Considering recent wire rod shortages in northern regions, some steel mills increased wire rod production. The difficulty in collecting steel scrap persisted, and electric furnace mills mostly maintained peak-valley electricity production levels. Considering some mills sold steel billet externally, overall construction steel production decreased slightly. On the demand side, downstream buyers released restocking demand after the Labour Day holiday. Additionally, speculative purchasing demand increased amid the rising price trend, with overall trading activity being active. On the inventory side, some regional markets were closed during the holiday, and agents slowed down their cargo pick-up pace, leading to a slight increase in mill inventory, while social inventory continued destocking. However, transactions were limited during the holiday, and destocking speed was relatively slow. According to market sources, some steel mills' rebar production in medium specifications was currently around the break-even line. Combined with premium specifications, overall comprehensive profitability was considerable, with gross margins above 100 yuan/mt. Flat steel profitability remained favorable, so construction steel production showed no significant increase recently. Looking ahead, steel mills remain profitable in production, and there is still room for output growth. However, after post-holiday restocking is completed, the sustainability of demand remains to be seen. Additionally, prices rose relatively quickly this week, with some traders showing divergent sentiments, and transactions at high prices still appeared sluggish. The risk of a phased pullback next week cannot be ruled out, but given that comprehensive costs provide support and the supply-demand imbalance is relatively small, downside room for correction is limited.
HRC: Post-Holiday Cost Support Amid Inventory Buildup, Prices Expected to Fluctuate at Highs Next Week After Surging
Cold-rolled and hot-rolled prices rose significantly this week, coupled with post-holiday restocking demand driving overall transactions to improve compared to pre-holiday levels. In terms of supply, rolling line maintenance decreased this week, and overall HRC production increased. Demand side, affected by the Labour Day holiday, apparent demand declined WoW this week. Inventory side, affected by the holiday, national social inventory accumulated WoW this week. SMM-tracked HRC social inventory was 4.8685 million mt, up 104,900 mt WoW, up 2.20% WoW. By region, Northeast, South China, and Central China markets saw larger inventory buildup. Cost side, the repeated US-Iran conflicts this week drove oil prices higher, highlighting the energy attribute of coking coal and coke, providing strong cost support for HRC. Looking ahead, coke has expectations for a third round of price increase, cost support remains relatively strong, and production is expected to increase going forward, but further growth in apparent demand is limited. Overall, HRC is constrained by demand growth lagging behind price growth, making it difficult for prices to sustain significant increases. Prices are expected to fluctuate at highs next week, with the most-traded HRC contract operating in the 3440-3530 range.
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