[SMM Steel Morning Meeting Summary] Weak market sentiment emerges, coke market expects price cuts

Imported Ore:

Some traders showed moderate enthusiasm for selling. As the weekend approached, the purchase willingness of steel mills weakened, with some mills tendering as needed. The market transaction atmosphere was moderate. In Shandong, the mainstream transaction price for PB fines was around 753-757 yuan/mt, with a low-end increase of 2 yuan/mt. In Tangshan, the transaction price for PB fines was near 760-765 yuan/mt, remaining stable. As of May 9, SMM data showed that the total inventory at 35 ports was 139.66 million mt, down 280,000 mt from before the holiday and down 350,000 mt WoW. The daily average port pick-up volume for imported ore was 3.019 million mt, down 129,000 mt from before the holiday. The post-holiday procurement slowdown led to a decline in port pick-up volume. The decrease in port inventory narrowed significantly. Looking ahead, iron ore demand is expected to weaken, which will continue to suppress iron ore prices.

Domestic Ore:

In west Liaoning, the price of iron ore concentrates remained relatively stable, with 66% grade wet-based ex-factory prices (excluding tax) at 700-710 yuan/mt. The production level at mines and beneficiation plants remains low, and the tight supply of iron ore concentrates provides some support for local ore prices. Steel mills are mainly purchasing as needed, with a strong desire to drive down prices. The market sentiment is clearly confrontational, and the overall transaction atmosphere is sluggish. Recent news of crude steel production cuts has intensified market pessimism, and it is expected that the price of local iron ore concentrates will remain in the doldrums in the short term.

Coking Coal Market:

Fundamentally, coal mine production is normal, and supply is relatively loose. Coal mine quotations have seen a slight correction, with nearly half of online auctions failing, and transactions mainly showing declines. In summary, the price of coking coal has pulled back, and the market sentiment is bearish. Coking coal prices are expected to remain in the doldrums.

Coke Market:

Supply side, coke enterprises maintain slight profits, with overall production enthusiasm being moderate. The operating rate remains high, but some coke enterprises have seen a slowdown in shipments, increasing shipment pressure. Demand side, the rigid demand for coke from steel mills remains, and with coke inventory at steel mills within a reasonable range, some mills have started controlling coke arrivals. Overall, the fundamental imbalance in the coke market is relatively small, but the market outlook for finished products is pessimistic. Recent weakening in coke cost support has led to bearish market sentiment. The coke market is expected to remain weak and stable, with a potential price reduction.

HRC:

Post-holiday HRC futures prices first rose and then fell, with spot price fluctuations being narrower. Fundamentally, steel mills have seen fewer new maintenance shutdowns, and HRC production decreased slightly by 4,700 mt. Some terminals had restocking needs after the holiday, but these were difficult to sustain. Social inventory increased WoW, but the cumulative YoY increase was significantly lower than in previous years. Meanwhile, steel mills actively shipped products. Under these combined effects, total inventory was 4.5897 million mt, up 47,400 mt WoW, with a YoY increase of only 1.04%.Looking ahead, some steel mills in northern and eastern China have new maintenance plans. Meanwhile, according to the latest SMM production schedule survey, the daily average production in May has declined, indicating a potential easing of supply pressure. With the upcoming rainy season in south China, the sustainability of demand may be questionable. However, in the short term, the supply-demand imbalance is relatively small, and it is expected that inventory may stop increasing and start decreasing. According to the SMM survey, pig iron production shows signs of peaking, and cost support is weakening. Overall, the short-term imbalance in the HRC market is not prominent at present. The macro environment has once again entered a vacuum period. In May, the focus will be on the sustainability of domestic demand. Currently, the order-taking performance of steel mills in May is moderate, but the short-term upward driving force is unclear. It is expected that the HC2510 contract may fluctuate rangebound within the 3140-3280 range.

Rebar:

In terms of spot prices, the market sentiment is cautious, and spot prices continue to decline. The price drops in various regions range from 10 to 30 yuan/mt, with overall weak market transactions. From a fundamental perspective, on the supply side, according to SMM production schedule data, there is a shortage of coiled rebar specifications in some steel mill projects in northern and north-west China. To replenish market resources, there is a slight tendency towards coiled rebar production in pig iron in May. Secondly, most blast furnace steel mills are profitable in terms of cash flow, and some manufacturers have plans to reduce HRC production and increase construction steel output. Recently, maintenance at some EAF steel mills has concluded, and there are production resumption plans. The operating rate may increase slightly next week. However, considering that spot prices are still at a low level, it is difficult to acquire cost-effective steel scrap, and the profitability of electric furnaces is unlikely to improve significantly, limiting the potential for production increases. On the demand side, there has been a slight increase in market demand in some areas after the holiday, but the increase in rainy days in the south has restricted construction progress at downstream sites, and demand is likely to remain weak in the later period. Overall, steel mill production is currently profit-driven. With blast furnace steel mills generally profitable in terms of cash flow, the momentum for producing construction steel remains strong. However, as demand gradually transitions into the off-season, increased supply and decreased demand are not conducive to a strengthening of spot prices. It is expected that the short-term spot price trend of construction steel will be under pressure.