SMM Daily Comment On Domestic HRC Market (Sep 7)

SHANGHAI, Sep 7(SMM) – HRC futures fluctuated and fell to 3,880 yuan/mt at closing, down 0.72% from the previous trading day. Spot market quotations in mainstream cities fell by 10-40 yua/mt today. According to SMM research, HRC production continued to increase this week with better profits than rebar. Steel mills received acceptable orders in September, and production enthusiasm was high. The short-term downstream order volume didn’t change significantly, and it is difficult for terminal procurement to see substantial improvements. China recently announced policies to boost real estate and manufacturing sectors, but it takes time for the effect to show. With raw material price rise far outpacing steel prices, steel mills’ profits have shrunk. Pig iron production could potentially fall back, threatening to cap future gains of iron ore price. Coke price may hold stable, supported by domestic coal mine accidents and falling overseas shipments. Market has priced in a series of macro policies that were issued recently. Additional policy stimulus is required to have a substantial impact on market. In view of ample supply and weak demand, HRC prices are at downside risk. Market players need to keep a close eye on demand recovery in the peak season.