【SMM Steel Morning Meeting Summary】Downstream stocking demand released before the holiday; be cautious of steel prices jumping initially and then pulling back after the holiday

Imported Ore:

Before the holiday, DCE iron ore futures continued to fluctuate in the doldrums, with the most-traded I2509 contract closing at 703.5, down 0.78% for the day. Traders' enthusiasm for selling was moderate; steel mills had largely completed their restocking before the holiday, resulting in fewer inquiries. Market trading sentiment was moderate. In Shandong, the mainstream transaction prices of PB fines were around 755-760 yuan/mt, down 5-10 yuan/mt from the previous trading day. In Tangshan, the transaction prices of PB fines were around 765-770 yuan/mt, up 5-10 yuan/mt from the previous trading day. According to an SMM survey, on April 30, the operating rate of blast furnaces at 242 steel mills surveyed by SMM was 88.89%, up 0.31 percentage points WoW. The daily average pig iron production of the sampled steel mills was 2.4535 million mt, up 12,000 mt WoW. SMM estimates that pig iron production will begin to drop back slightly this week. However, with steel mill profits remaining moderate, the decline in pig iron production is expected to be relatively small. Overall demand for iron ore still provides some support for ore prices. Considering the pressure from news of crude steel production restrictions, it is expected that iron ore prices will face upward and downward pressures after the holiday, mainly continuing to fluctuate rangebound.

Domestic Ore:

The trading sentiment in Tangshan's iron ore fines market was sluggish. The delivery-to-factory prices of 66% grade dry-basis iron ore fines, inclusive of tax, were 940-950 yuan/mt. Producers had a strong wait-and-see sentiment, and those holding spot cargoes stood firm on their quotes. However, some intended to destock slightly before the holiday. A few steel mills showed increased willingness to restock, but considering profits, there were few inquiries for price increases, thereby suppressing local price increases. Overall, the market's game-playing sentiment remained evident. Coupled with the recent abundance of negative external news, it is expected that local iron ore concentrate prices will remain in the doldrums in the short term.

  
Coking Coal Market:

The quoted price of low-sulphur coking coal in Linfen was 1,310 yuan/mt. The quoted price of low-sulphur coking coal in Tangshan was 1,370 yuan/mt.

In terms of fundamentals, mainstream coal mines were operating normally. The coking coal and coke futures market declined, and downstream procurement sentiment was cautious. Downstream players restocked coking coal on a need-to basis. Traders adopted a wait-and-see approach, and order signing at coal mines was moderate. Prices of some coal types were under pressure, with most remaining stable. In summary, coking coal prices may remain stable temporarily after the holiday.

 
Coke Market:
The nationwide average price of premium metallurgical coke (dry quenching) was 1,680 yuan/mt. The nationwide average price of quasi-premium metallurgical coke (dry quenching) was 1,540 yuan/mt. The nationwide average price of premium metallurgical coke (wet quenching) was 1,340 yuan/mt. The nationwide average price of quasi-premium metallurgical coke (wet quenching) was 1,250 yuan/mt.

In terms of supply, most coking enterprises maintained profits and had good production enthusiasm, with coke supply remaining high and stable. In terms of demand, pig iron production at downstream steel mills' blast furnaces remained high, leading to high daily coke consumption. However, there are expectations that pig iron production may peak. After the holiday, steel mills' willingness to purchase and restock coke was moderate. In summary, the fundamentals of coke remain good after the holiday, but macro expectations are moderate. Coupled with the potential implementation of crude steel production reduction policies, which suppress market confidence, the coke market may remain stable after the holiday.

HRC:
Last week, HRC futures prices initially rose and then pulled back, mainly fluctuating rangebound before the holiday. In terms of supply, steel mills currently have high production enthusiasm, with few new rolling line maintenance activities. Last week, the impact of hot-rolled coil maintenance was 40,600 mt, unchanged from the week before last. This week, the impact of hot-rolled coil maintenance is expected to be 112,600 mt, an increase of 72,000 mt WoW. HRC production continues to increase. In terms of demand, downstream restocking demand before the holiday was moderate, and social inventory continued to decline. However, some traders held bullish expectations for after the holiday and stood firm on their quotes, withholding sales. Overall apparent demand remained at a high level year-on-year but dropped back slightly WoW. On the cost side, before the holiday, steel mills had expectations of restocking raw materials, with pig iron production increasing slightly. The fundamentals of coke remain good, and it is expected to remain stable in the short term. Overall, raw material support is neutral. In summary, there are still expectations for macro policy efforts. During the holiday, focus on the progress of tariff negotiations. After the holiday, pay attention to the dynamics of crude steel production reduction. It is expected that the HC2510 contract will operate within the 3,150-3,270 range after the holiday.

Rebar:

Before the holiday, rebar futures fluctuated, closing at 3,096, down 0.42% from the previous trading day. In terms of spot, as markets gradually closed for the holiday, spot quotes in various regions were largely stable, with some regional prices loosening by 10-20 yuan/mt. Trading performance for the day was moderate.

From a fundamental perspective, on the supply side, most blast furnace steel mills are profitable in producing construction materials. A few producers originally planned to conduct maintenance in early May but have postponed their plans due to production profitability. Secondly, to meet billet orders, steel mills in coastal regions have significantly reduced their planned rebar output for May. Recently, steel scrap prices have continued to exceed the psychological expectations of EAF steel mills, leading to persistent difficulties in scrap collection, which continues to affect steel mills' production status. Steel mills are generally maintaining a medium-to-low production level. However, given that some regions in Southwest China will implement electricity price subsidies from May onwards, it cannot be ruled out that producers in these regions may increase their operating hours. On the demand side, downstream construction sites have restocking demand before the holiday, and overall market trading performance has been moderate. After the holiday, there is still an expectation for a wave of procurement volume from projects, and demand remains worth anticipating. Looking ahead, supply-side pressures are not prominent for the time being, and demand expectations after the holiday are likely to be sustained, providing some support for the bottom prices of the market. However, considering the slower digestion of steel mill and trader inventories during the holiday, inventory pressure may rebound in the first week after the holiday. It is expected that spot prices may still rise after the holiday, but the increase will be limited. Caution should be exercised against insufficient demand release after the holiday, which could force market sentiment to weaken, leading to prices jumping initially and then pulling back. Pay attention to the resistance levels of 3,170-3,180 for the RB2510 contract after the holiday.