[SMM Steel Morning Update] Hot Metal Production Continues to Decline, or May Reach a Periodic Low.

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Macro

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[Pakistan: Making Every Effort to Bring US and Iran Back to the Negotiating Table]

At a press conference, Pakistan's Foreign Ministry spokesperson Andrabi Tahir said that Interior Minister Naqvi arrived in Tehran on the 11th and is holding meetings with senior Iranian officials. The purpose of Naqvi's visit to Iran is to discuss bilateral relations, security-related issues, and regional developments, particularly regional peace and stability. Andrabi also said: "Pakistan is making every effort to bring the US and Iran back to the negotiating table, implement the US-Iran memorandum of understanding, and pave the way for regional peace and stability."

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Industry and Downstream

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[IEA: Prolonged Closure of Strait of Hormuz Hits Global Oil Markets]

The International Energy Agency (IEA), headquartered in Paris, released its latest monthly oil market report on August 12 local time, stating that global oil supply and demand have been significantly impacted by the prolonged closure of the Strait of Hormuz, high fuel prices, and the Middle East situation. The IEA expects global oil demand to decline by 1.6 million b/d in 2026, with the decline widening by 510,000 b/d from the previous month's forecast; global oil supply is expected to decline by 4.3 million b/d. The report shows that global oil supply increased to 101.5 million b/d in July, but was still down by 6.3 million b/d compared to the same period last year, of which 8.3 million b/d of production in the Gulf region remains shut in. Global observable oil inventories plunged by 69 million barrels in July, and have cumulatively fallen by 410 million barrels since the start of the war. The IEA expects the global oil market supply deficit to reach 1.8 million b/d in Q3 this year, more than double the previous month's forecast. The report noted that with available inventory buffers depleting rapidly, the urgency of reopening the Strait of Hormuz has further increased. International oil prices swung wildly in July, at one point rising to $105 per barrel; the current spot price for North Sea crude is around $92 per barrel.

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[CAAM: July NEV Exports Up 5.7% MoM and 1.5x YoY]

CAAM released data showing that in July, NEV exports reached 553,000 units, up 5.7% MoM and up 1.5x YoY; conventional fuel vehicle exports stood at 490,000 units, down 4.6% MoM but up 40% YoY. In January-July, NEV exports totaled 2.909 million units, up 1.2x YoY; conventional fuel vehicle exports totaled 3.231 million units, up 36.2% YoY.

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[SMM HRC Inventory] Most Regions Saw Inventory Declines This Week

This week, HRC inventory in Ningbo stood at 325,000 mt, down 12,000 mt or 3.45% WoW, but up 8.37% YoY.

HRC inventory in Lecong reached 972,100 mt this week, down 17,900 mt or 1.81% WoW. It was up 34.03% YoY on a solar calendar basis and 41.50% YoY on a lunar calendar basis.

HRC inventory in Shenyang was 206,100 mt this week, up 5,600 mt or 2.79% WoW. It increased by 33,600 mt or 19.48% YoY.

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[SMM Blast Furnace Operating Rate] Hot Metal Production Continued to Decline, Possibly Nearing a Periodic Low

According to an SMM survey, as of August 12, the blast furnace operating rate among the 242 steel mills tracked by SMM was 88.91%, down 0.13 percentage points WoW. The capacity utilization rate of these blast furnaces was 88.60%, down 0.2 percentage points WoW. The daily average hot metal production of the sampled steel mills was 2.4005 million mt, down 5,300 mt WoW.

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[CAAM: July Auto Sales Down 8% MoM and 0.3% YoY]

Data released by the CAAM showed that auto production and sales in July reached 2.573 million and 2.584 million units, down 6.8% and 8% MoM, and down 0.7% and 0.3% YoY, respectively. Auto production and sales January-July totaled 17.567 million and 17.602 million units, both down 3.7% YoY, with the rate of decline narrowing further from H1.

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[SMM Building Materials Inventory] Inventory Buildup Was Minor Due to Typhoon Impact

As of August 12, total building materials inventory in Xi'an this week was 330,000 mt, up 3,000 mt WoW, an increase of 0.92% WoW but a YoY decline of 5.06%. Recently, arrivals of resources in the local market decreased, but downstream construction pace was limited by rainfall, leading to a continued inventory buildup, though the pace of accumulation slowed down.

As of August 12, building materials inventory in Hangzhou this week was 1.226 million mt, flat WoW, but up 73.16% YoY. Last weekend, Zhejiang was affected by typhoon weather, causing a phased suspension of operations at terminals and downstream sites. Both resource arrivals and downstream procurement demand decreased accordingly. Although activities gradually resumed this week, the overall arrival pace still fell short of previous levels, and the release of demand was delayed by water accumulation at project sites, keeping inventory at a high level.

As of August 12, total building materials inventory in Guiyang this week was 84,500 mt, down 10,100 mt or 10.68% WoW. Among this, rebar inventory was 60,900 mt, down 6,700 mt WoW, and wire rod inventory was 23,600 mt, down 3,400 mt WoW.

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Other Hot Topics

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⭕[PBOC: To Conduct Overnight Reverse Repo Operations on August 14 and August 17–19, with Daily Operation Volume Not Exceeding 600 Billion Yuan]The People's Bank of China announced that, to better match the short-term liquidity needs of the banking system, it will conduct overnight reverse repo operations on August 14 and from August 17 to August 19, using a fixed interest rate and quantity-based tender, with the daily operation volume not exceeding 600 billion yuan.

⭕[Beijing Releases the Tenth Round of Proposed Residential Land Supply List for 2026]On August 12, the website of the Beijing Municipal Commission of Planning and Natural Resources released the tenth round of the proposed residential land supply list for 2026, which includes the Yuegezhuang plot in Fengtai District, with a land area of approximately 6.61 hectares and a planned gross floor area of 141,500 m², and is expected to be supplied soon. The details of this round's list are as follows: Plot DC-L02 of the shantytown redevelopment land project in Area A, Yuegezhuang Village, Fengtai District, located in Liuliqiao Subdistrict, Fengtai District, between the 3rd and 4th Ring Roads, adjacent to Liuliqiao Station, an interchange station of Metro Line 9 and Line 10. It is surrounded by living amenities such as Qianxi Shopping Center, Ginza Harmony Plaza, the Fifth Medical Center of the PLA General Hospital (North Campus), Wanfeng Park, and Yuegezhuang Urban Leisure Forest Park.

⭕[Iran Says Missiles Sufficient Even If War Lasts Years]According to Iranian media reports on August 11, Naghdi Mohammad Reza, Advisor to the Commander-in-Chief of the Islamic Revolutionary Guard Corps, stated that all weapons currently used by Iran are independently developed, and missile production far exceeds launches, with the same holding true for drones. Even if the war continues for years, Iran's ballistic missiles can rain down on the enemy's heads.

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