Steel Inventory Continues to Decline, Short-Term Steel Prices Struggle to Break Out of the Volatile Range [SMM Steel Industry Chain Weekly Report]

Forecast for Next Week: Steel Inventory Continues Destocking, Short-Term Steel Prices Likely to Maintain Fluctuating Trend

This week, the ferrous metals series fluctuated rangebound. On the news front, the National Financial Work Conference and the National Housing and Urban-Rural Development Work Conference were held in Beijing at the beginning of the week. The Financial Work Conference emphasized the need to implement a more proactive fiscal policy in 2025, with sustained and stronger efforts, and to deploy a stimulus policy package. The Housing and Urban-Rural Development Work Conference highlighted the need to continue efforts to stabilize the real estate market in 2025, sending positive policy signals. In the spot market, steel prices stabilized after a decline during the week, with end-user purchasing sentiment improving and transactions showing WoW improvement.

In the short term, under the support of winter stockpiling expectations, raw material prices are unlikely to form a clear trend and are expected to continue fluctuating rangebound. For finished steel, steel inventory continued destocking this week, with strong demand resilience under the off-season backdrop. Export data showed high volatility, and the fundamental imbalance in steel was relatively small. Recently, the profit margins for HRC and rebar have narrowed, raising concerns about further price fluctuations and potential production shifts. In the absence of macro policy stimulus, the upward window for short-term steel prices remains closed.

Iron Ore: Off-Season Effect More Pronounced, Iron Ore Prices Expected to Fluctuate Downward Next Week

Looking ahead to next week, Australia's shipments may increase, driving a slight rise in global shipments. Although port arrivals may rebound, the estimated increase is relatively small, and iron ore supply remains ample. On the demand side, according toSMM's blast furnace maintenance data, steel mills in Hebei may resume production after maintenance, but steel mills in Shanxi, Shaanxi, Jiangsu, and other regions have blast furnace maintenance plans, and pig iron production is expected to continue to decline slightly. Additionally, the apparent demand for rebar has recently dropped significantly, and the overall inventory decline has slowed, indicating a pronounced off-season effect. Considering that steel mills will gradually start pre-holiday stockpiling after New Year's Day, this will provide some support for iron ore spot prices.Iron ore prices are expected to fluctuate downward next week, but the downside room is limited.

Coke: Coke Fundamentals Remain Loose, Coke Market May Fluctuate Downward Next WeekSupply

side, coke producers' profitability has improved, and sales performance is moderate, with relatively low inventory pressure, allowing them to maintain normal production. Coke supply fluctuations are minimal. On the demand side, steel mills' coke inventory has slightly increased, coupled with declining pig iron production and the fifth round of coke price cuts, leading to low restocking willingness for coke. On the raw material side, coke producers' coking coal inventory has recently accumulated, with low restocking willingness, and coking coal prices still have room to decline. In summary, coke fundamentals remain slightly loose, with weak cost support, and the expectation of coke price cuts persists. The coke market may fluctuate downward next week.Rebar: Winter Stockpiling Sentiment Weaker Than Previous Years, Market Activity Declines, Spot Prices Expected to Fluctuate Rangebound

This week, favorable macro policies were introduced, and some steel mills in certain regions showed strong willingness to raise prices, leading to a slight increase in the national average price of construction steel. From a fundamental perspective, the current supply and demand for construction steel are both weak. This week, the national rebar inventory was371,220mt, down2,800mt WoW, continuing the inventory decline, but the decline rate narrowed significantly compared to last week. On the production side, in January, steel mills in north China are increasing maintenance, while in south China, there are both production controls and resumptions. Long-process supply is expected to remain relatively stable, while EAF steel mills in Fujian and south-west China plan to shut down for annual maintenance at the beginning of January, with other regions following around mid-January, leading to a gradual reduction in production. On the demand side, some regions are rushing to meet deadlines, but the overall demand decline is hard to reverse. Regarding winter stockpiling, some steel mills introduced prepayment policies during the week, but there were no actual stock-locking winter stockpiling policies. Meanwhile, market participants' weak willingness for winter stockpiling remains unchanged, making significant price fluctuations unlikely.Next week, the trend is expected to fluctuate rangebound, with theRB2505contract likely to fluctuate within the3,200-3,350range.HRC: Fundamental Imbalance Slowly Accumulating, Short-Term HRC May Continue Fluctuating Rangebound

From a fundamental perspective, HRC production increased1,120mt WoW this week, with supply fluctuating slightly. At year-end, terminal demand continues to be released, coupled with active shipments by traders. Overall, social inventory continued to decline, with traders focusing on destocking and showing weak purchasing willingness, while in-plant inventory accumulated. As a result, total inventory was420,390mt, down1,770mt WoW. Looking ahead, some steel mills still have maintenance plans, and short-term HRC production may fluctuate slightly. As year-end approaches, manufacturing demand is expected to weaken gradually, and inventory accumulation risks may slowly emerge. On the raw material side, according toSMMsurvey tracking, pig iron production is expected to remain at low levels in the short term, and the fifth round of coke price cuts is imminent, leading to weak cost support. Overall, domestic macro policies are entering a quiet period before the Chinese New Year, and the impact of earlier meetings falling short of expectations is gradually diminishing. Although HRC faces inventory accumulation risks, this aligns with historical trends, with inventory accumulation even delayed compared to previous years. The fundamental imbalance is not significant, limiting the downside room.Next week, theHC2505contract is expected to fluctuate within the3,360-3,480range.Steel Scrap: Panic Sentiment Eases, Steel Scrap Prices Expected to Stabilize

This week, driven by favorable macro news, finished steel prices fluctuated upward, pushing steel scrap prices higher, with weekly increases ranging from

10-60yuan. Looking ahead, macro policies still hold positive expectations, coupled with a continuous decline in steel scrap arrivals, maintaining market optimism. However, given the current situation, macro policies primarily target long-term goals, with limited direct stimulus to the steel scrap market. Additionally, steel mills show low willingness for winter stockpiling, and EAF mills are entering seasonal production reductions or shutdowns. Therefore,steel scrap prices are expected tomaintain a fluctuating trend within a narrow range, with fluctuations between-50and100yuan/mt.1. For data mentioned in the report, please visit the SMM database (

https://data-pro.smm.cn/).

2. For more information on SMM steel insights, analysis reports, and databases, please contact Li Ping from the SMM Steel Division at 021-51595782.

*The views in this report are based on information collected from the market and comprehensive evaluations by the SMM research team. The information provided in this report is for reference only, and risks are borne by the user. This report does not constitute direct investment research advice. Clients should make prudent decisions and not substitute this for independent judgment. Any decisions made by clients are unrelated to SMM. Additionally, SMM is not responsible for any losses or liabilities resulting from unauthorized or illegal use of the views in this report. SMM reserves the right to modify and interpret the terms of this statement.