2024 Annual Review and Outlook for HRC [SMM Special]

[Special Report by SMM] 2024 HRC Annual Review and Outlook
In 2024, HRC prices exhibited a "U-shaped" trend. The national average spot price of SMM HRC fluctuated between 3,021-4,115 yuan/mt, with an annual average of 3,649.38 yuan/mt, down approximately 8.9% YoY compared to the 2023 average of 4,004.54 yuan/mt. From the 2024 HRC futures and spot price trends, HRC prices experienced a downward fluctuation in Q1, a stable yet strengthening trend in Q2, a sharp drop followed by a strong rebound in Q3, but due to a lack of sustained upward momentum, prices remained stable with a weak trend in Q4.

Q1 [Average Spot Price: 3,687-4,107 yuan/mt]
In January-February, HRC prices weakened and declined. The delayed resumption of steel mills and extreme weather conditions such as rain, snow, and cold waves disrupted downstream resumption cycles, further delaying steel mill production and causing the price center to shift downward. In mid-March, some regional steel enterprises announced production cuts, leading to a rapid collapse in cost support and a significant drop in HRC prices. As steel mills resumed production, prices briefly bottomed out, but by the end of the month, apparent demand for HRC fell sharply, market concerns intensified, and prices weakened again.

Q2 [Average Spot Price: 3,699-3,887 yuan/mt]
In April, driven by favourable macro sentiment and accelerated blast furnace resumption, HRC prices followed raw material price increases. However, downstream profit compression led to cautious procurement, limiting the price increase. By June, steel mills maintained moderate profit margins, and short-term furnace charge provided support. Supply remained high, and while manufacturing demand showed some divergence, overall resilience was moderate. Additionally, an important domestic meeting was scheduled for mid-June, with market expectations remaining moderate. HRC prices fluctuated rangebound with limited adjustment depth.

Q3 [Average Spot Price: 3,021-3,744 yuan/mt]
In July, macroeconomic meetings delivered less favourable outcomes than expected. Coupled with market panic caused by the transition to new rebar standards and the deepening impact of the off-season, HRC prices dropped significantly. In August, multiple macroeconomic indicators fell short of expectations, concerns over overseas economic recession intensified, and domestic end-use demand remained sluggish, leading to a low market transaction atmosphere. By early September, HRC prices hit a new low for 2024. However, before the National Day holiday, a series of unexpected favourable macro policies ("stimulus policy package") reversed the downward trend, driving a strong price surge. HRC prices in major cities rose by 400-500 yuan/mt MoM from the end of August.

Q4 [Average Spot Price: 3,434-3,641 yuan/mt]
As the macroeconomic impact faded, HRC prices returned to fundamentals. By November, with construction material demand peaking and pulling back, HRC production gradually increased. Meanwhile, industries such as automotive and home appliances, supported by trade-in subsidy policies, saw moderate consumption during the October peak season. However, subsequent meetings mainly reiterated existing information, with limited new favourable policies. Futures prices rebounded slightly before pulling back. As year-end approached, increased steel mill maintenance led to a decline in HRC production. Combined with weakening manufacturing demand, fundamental imbalances accumulated, and HRC prices fluctuated rangebound.

Looking ahead to the 2025 HRC market, from the demand side, HRC apparent demand has remained at a high level in recent years, with a rapid increase in its share of traditional demand, a trend expected to continue. In 2024, driven by macro policies to expand domestic demand and promote consumption, sales data for downstream manufacturing industries such as home appliances and automobiles showed sustained growth. Coupled with strong momentum from the "go global" strategy in manufacturing, HRC demand demonstrated strong resilience YoY in 2024.

On the supply side, six new HRC production lines were commissioned in China in 2024, adding approximately 18.8 million mt of new sheets & plates capacity. The rapid capacity growth outpaced overall demand improvement, putting downward pressure on HRC prices and shifting the price center lower. Currently, SMM estimates that domestic HRC capacity awaiting commissioning in 2025 is around 12.94 million mt (with some steel mill commissioning plans pending). Additionally, the cooling real estate sector has led to a yearly decline in rebar production, prompting steel mills to gradually shift their production focus to HRC, further increasing supply pressure.

Therefore, in 2025, attention should remain on the relationship between industry surplus and domestic demand stimulus policies. The issue of overcapacity persists, while domestic demand improvement remains limited. Meanwhile, accelerated overseas anti-dumping measures, combined with increased uncertainties in domestic and international policies, are expected to slow the growth rate of steel exports in 2025. Furthermore, the imbalance in raw material overcapacity may escalate, weakening cost support. Overall, if the tug-of-war between sellers and buyers falls short of expectations, the HRC price center in 2025 is expected to have further room to decline.