SMM Ferrous Metal Market October Review And November Forecast

Ferrous metal market strengthened after weakening in October. In the first half of the month, a brief stagnation of domestic demand was reported during the National Day holiday and the Asian Games. In addition, expected interest rate hike and geopolitical conflicts led to rising risk aversion sentiment. Chinese A share also fell below 3,000 points again in mid-October. Meanwhile, downstream steel consumption failed to improve after the National Day. Therefore, a decline in steel product prices forced steel mills to reduce production, adding bearishness into raw material market. In mid-October, with the end of bearish ferrous metal sentiment, the most-traded rebar futures contract ceased falling and stabilised at 3,550 yuan/mt. Domestic favourable policies were once again introduced. The central government will issue an additional 1 trillion yuan of treasury bonds in the fourth quarter of this year. The early release of local government bonds is expected to be extended for another five years. China will promote a new round of "housing reform" and other favourable policies. Under such circumstance, ferrous metal prices rebounded. From a fundamental point of view, fundamentals of raw materials were still stronger than that of steel products. In spite of softening demand, iron ore market remained resilient, with inventory at ports shrinking to a 4-year low. Therefore, iron ore prices led the gains among ferrous metals, and steel product prices then move upwards at the end of the month, tracking swings of raw materials. Currently, supply and demand of ferrous metal market saw no a big swift. Construction steel demand may weaken in November, which will limit upside in steel product prices. In a word, ferrous metal market may witness a slower rise and then stabilise in November.