SMM daily comment on domestic HRC market (Aug 24)

SHANGHAI, Aug 25 (SMM) –

HRC futures prices fluctuated and dived towards the end of the trading session, declining 1.57% at 3,884 yuan/mt. In terms of spot market, major offers for HRC dropped by 10-60 yuan/mt. On the supply side, some steel mills in Southwest and South China put rolling line equipment under maintenance, cutting HRC output slightly. Since production reduction policy hasn’t been implemented yet, production is expected to rebound next week. On the demand side, the sharp drop in market transactions led to a slight accumulation of social inventories compared to last week. On the cost side, the safety inspections after Shanxi coal mine accidents dashed hopes for coke price cuts. High molten iron output at the steel mill side and low inventory at the port side formed strong support for iron ore prices, which will offer solid cost support to HRC prices. Rumour has it that the central government will control infrastructure investment, hitting ferrous metals prices and infrastructure stocks. Market confidence suffered accordingly, which also hit HRC market in the short term. However, HRC price is expected to follow the rise of raw materials and fluctuate within a narrow range. Market players need to be alert to downside risks to HRC prices after pricing in cost increase and if demand falls short of expectations.