HRC Prices Will Be Strongly Supported by the Infrastructure Construction

SHANGHAI, Jan 27 (SMM) - On the supply side, the recent Winter Olympics-oriented production restrictions have been issued one after another. Taking Tangshan City as an example, in the first quarter of 2022, the total crude steel output affected by the off-peak production scheme in Tangshan City will be around 8.91 million mt, close to 30% of the output in the same period in 2021. The 2+26 cities that demand off-peak production during the Winter Olympics cover 47% of the domestic RHC production capacity. Under the influence of the Winter Olympics and environmental protection production restrictions, the supply of HRC will drop significantly in the first quarter of 2022.

On the demand side, a series of macro policies, including infrastructure investment, newly-started construction projects, interest rate and RRR cuts, tax and expense cuts, etc., have served as a combination tool to the demand. To sum up, HRC will see narrowing supply and gradual recovery of demand after the CNY holiday. The SMM average price of domestic HRC stood at 4,882 yuan/mt as of January 25. It is expected that in the first quarter after the holiday, the HRC prices will fluctuate between 4,810-5,400 yuan/mt with strong upside momentum.