【SMM Hot Topic】Price Spread Between Hot-rolled and Cold-rolled Products Plunges 6% - When Will the Decline Bottom Out?

• The decline in cold-rolled steel prices was greater than that of HRC, with the price spread between cold-rolled and hot-rolled steel narrowing by 6% in April.

In April, the price spread between cold-rolled and hot-rolled steel narrowed sharply. According to SMM data, as of April 25, the nationwide average price of cold-rolled steel fell by 3.5% MoM from the March average, while the nationwide average price of HRC fell by 2.9% MoM. The average price spread between cold-rolled and hot-rolled steel decreased from 699 yuan/mt in March to 655 yuan/mt, narrowing by 6.4% MoM.

• Divergent supply and demand performance: Price spread between cold-rolled and hot-rolled coils narrows under pressure

According to SMM data, as of April 27, the total inventory of hot-rolled coils nationwide decreased by 10.8% compared to the end of March, while the total inventory of cold-rolled coils increased slightly by 3.5% compared to the end of March. During the peak season of "golden March and silver April" when inventory should normally decline, the inventory of cold-rolled coils increased instead of decreasing...

From a fundamental perspective, from March to April, cold-rolled coil production continued to fluctuate at a high level. However, due to the maintenance of steel mills in the early stage, coupled with the decline in profits from hot-rolled coil production in steel mills starting from late March, and the comprehensive impact of some steel mills redirecting pig iron production, the rebound in hot-rolled coil production was relatively slow.

However, on the demand side, since late February, the US has been wielding the "tariff stick," and the Sino-US tariff war has continued to escalate. It is understood that, influenced by changes in tariff policies, there was a surge in "panic exports" by downstream enterprises in Q1, which to some extent depleted demand. In addition, since April, export pressure has surged for home appliance enterprises, mainly small and medium-sized ones, and the export business to the US for most enterprises has stalled. While exports have been impacted, the release of domestic demand has been slightly weaker than expected. This has led to a sluggish decline in cold-rolled coil inventory since the end of March, with inventory beginning to accumulate continuously in April. The increase in cold-rolled coil inventory, coupled with the continued good decline in hot-rolled coil inventory, has resulted in a significantly larger decline in cold-rolled coil prices compared to hot-rolled coil prices.

• A significant decline in cold-rolled steel profits may lead to production adjustments by steel mills, with limited further decline in the price spread between cold-rolled and hot-rolled steel.

Looking ahead, as of April 25, the profit per mt of cold-rolled steel production at blast furnace steel mills had dropped below 50 yuan, while hot-rolled steel profits remained around 100 yuan. A few steel mills had already shifted their production from cold-rolled to hot-rolled steel. The current severe inversion between cold-rolled and hot-rolled steel profits is likely to prompt some steel mills to adjust their production schedules accordingly. SMM expects domestic cold-rolled steel production by steel mills to decline in May, with a corresponding easing of supply pressure.

On the demand side, in the home appliance industry, according to the latest production schedule report for the three major white goods released by ChinaIOL, the total production schedule for air conditioners, refrigerators, and washing machines in May 2025 is 38.21 million units, up 5.9% YoY from actual production. With major promotional events such as the "May Day Golden Week" and "618" approaching, there is still some anticipation for demand from downstream industries like home appliances and automobiles in May. Additionally, in terms of exports, domestic enterprises are actively exploring markets outside the US, with recent increases in orders from markets outside the US already evident. Entering May, the imbalance between supply and demand for cold-rolled steel is expected to ease. SMM believes that there will be limited further decline in the price spread between cold-rolled and hot-rolled steel in May.