Off-Season Impact Gradually Increases, Short-Term Steel Prices Expected to Fluctuate [SMM Steel Industry Chain Weekly Report]

Forecast for Next Week: Off-Season Impact Gradually Increases, Steel Prices Expected to Fluctuate in the Short Term

This week, the ferrous metals series continued to fluctuate rangebound, with raw materials performing slightly stronger than steel. According to data released by the China Federation of Logistics and Purchasing, the manufacturing PMI for December was 50.1%, down 0.2 percentage points from the previous month. Manufacturing remained in expansion territory, staying above the critical point for three consecutive months. Mid-week, the New Year's Day holiday was observed, during which President Xi Jinping delivered an important speech at the National Committee of the Chinese People's Political Consultative Conference's New Year Tea Party, stating that the economy in 2024 is expected to operate steadily with progress, with an estimated annual GDP growth of around 5%. After the holiday, steel inventory data was released, showing an expansion of holiday and seasonal impacts. In the spot market, transaction levels further cooled this week.

In the short term, pre-holiday winter stockpiling demand still provides support. For steel, steel inventory slightly accumulated this week, but the absolute inventory level remains at a low point compared to the same period in previous years, with minimal fundamental risks. Considering that the macro stimulus policy window has not yet opened, steel prices are expected to fluctuate in the short term. Attention should be paid to the speed of inventory buildup before the holiday and the potential impacts related to the U.S. presidential inauguration in January.

Iron Ore: Pig Iron Production Expected to Rebound, Iron Ore Prices Likely to Fluctuate Upward Next Week

Outlookfor next week, global shipments may fall back from highs. Additionally, due to the previous decline in shipments, port arrivals are also expected to decrease. On the demand side, according to SMM blast furnace maintenance data, some blast furnaces have production resumption plans next week, and pig iron production is expected to stop declining and rebound. Furthermore, considering that steel mills will become more active in restocking after New Year's Day, spot iron ore prices are likely to receive some support. Iron ore prices are expected to continue fluctuating upward next week.

Coke: Coke Market Likely to Fluctuate Next Week

Key Insights: On the supply side, coke producers maintain good profitability and moderate sales performance, with no inventory buildup pressure, continuing normal production. Changes in coke supply remain relatively small. On the demand side, steel mills' coke inventory slightly increased, but with rising pig iron production and stabilized coke prices, their willingness to restock coke has returned to normal levels. On the raw material side, recent coal mines have focused on safe production, leading to a decline in output, and the downside room for coking coal prices is limited. In summary, the coke market fundamentals are moving toward balance, with slightly enhanced cost support. The expectation of coke price reductions is relatively small, and the coke market is likely to fluctuate next week.

Rebar: Steel Mills Confirm Winter Breaks, Demand Weakens, Spot Prices More Likely to Fall Than Rise

This week, construction steel spot prices fluctuated rangebound. Regarding fundamentals, in January, steel mills in north China, north-west China, and south-west China have added new blast furnace maintenance plans, while in east China, although some mills resumed production, others reduced output. For short-process production, some steel mills in east China have already started their winter breaks, while most other regions will begin winter breaks around January 10-15. Overall, construction steel supply still has room to decline. On the demand side, northern regions have largely halted construction, while conditions in south China remain moderate. It is expected that after the 10th, construction sites will gradually begin to close for the holiday, continuing the weakening demand trend, with inventory turning upward. This week, two steel mills in Jiangsu announced winter stockpiling policies, including price locking and hedging, with winter stockpiling enthusiasm slightly higher in the south than in the north. In summary, with weak supply and demand fundamentals, winter stockpiling transactions in the market remain subdued. Spot prices lack upward momentum and have slight downside room. Next week, the trend is expected to fluctuate downward, and next week, the RB2505 contract is expected to fluctuate within the range of 3,200-3,330.HRC: Fundamental

Imbalance Eased, HRC Market Likely to Fluctuate Next WeekThis week, HRC spot prices fluctuated. Regarding fundamentals, the number of hot rolling production lines under maintenance increased this week, leading to a decline in weekly HRC production and reduced supply pressure. Meanwhile, market demand recovered slightly, with some downstream end-users restocking in preparation for the Chinese New Year holiday, easing fundamental imbalances. Looking ahead,

the manufacturing PMI for December was 50.1, remaining in expansion territory, indicating that China's economic prosperity continues to improve. Combined with downstream end-users gradually starting to restock, there is a slight increase in demand for finished products. The fundamental imbalance in HRC is expected to continue easing, supporting HRC prices. On the cost side, coke prices are not expected to decline next week, while iron ore prices may rise slightly, enhancing cost support for HRC. In summary, HRC fundamentals show minimal imbalance, with cost support still present. The most-traded HRC contract is expected to fluctuate within the range of 3,370-3,490 next week.Steel Scrap: Accelerated Shipments in Some Regions,

Steel Scrap Prices Under PressureDue to changes in tax policy, uncertainty in the steel scrap market has increased. Some producers have chosen to lower steel scrap purchase prices to offset rising costs and accelerate shipments to avoid price drops, leading to increased arrivals at steel mills and putting pressure on steel scrap prices. This week, mainstream steel mills' steel scrap prices fell by

10-100 yuan. Looking ahead, macro policies have entered a year-end vacuum period, and market sentiment has turned cautious, with most participants adopting a wait-and-see attitude. Combined with generally weak winter stockpiling enthusiasm this year and electric furnace mills gradually starting their year-end breaks, demand for steel scrap is expected to decline further. Steel scrap prices lack strong support, and in the short term, steel scrap prices are likely to fluctuate downward, with a range of (-100, 50) yuan/mt.

1. For data mentioned in the report, please visit the SMM database (https://data-pro.smm.cn/)

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

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