Markets Gradually Begin Holidays: Will Steel Prices See a "Good Start" in the Year of the Snake?! [SMM Steel Industry Chain Weekly Report]

Forecast for Next Week: Market Gradually Enters Holiday Mode, Will Steel Prices See a "Good Start" in the Year of the Snake?!

This week, the ferrous metals series fluctuated rangebound. Overseas, US President Trump was inaugurated on the 20th, signing over 40 executive orders on the same day, covering border immigration policies, withdrawal from international organizations or agreements, among others, drawing significant international attention. Domestically, provincial-level local two sessions for 2025 were held successively. As of January 21, GDP targets for 2025 from 31 provinces (regions, cities) have been announced, with most provinces setting targets of no less than 5%. In the spot market, as the Chinese New Year approaches, some merchants have already started their holiday breaks this week, leading to a rapid decline in market transaction levels.

In the short term, the spot market is gradually entering a dormant state, coupled with heightened risk aversion sentiment in the capital market. Steel prices are expected to stabilize before the holiday. Currently, steel inventory pressure is relatively low YoY. Attention should be paid to the post-holiday inventory buildup and destocking pace. If post-holiday fundamentals show mild imbalances, combined with optimism for a "good start" after the holiday, prices may see a rebound opportunity.

Iron Ore: Macro and Fundamentals Provide Joint Support, Prices Expected to Fluctuate Upward Next Week

This week, imported iron ore prices fluctuated rangebound. On the macro side, at the beginning of the week, US President Trump signed 40 executive orders on his first day in office, but none addressed the market's concerns about steel export tariffs. Additionally, the easing of US-China relations alleviated short-term market concerns, boosting market sentiment. On the fundamentals side, heavy rains significantly reduced Rio Tinto's shipments, leading to a 6.7% WoW decline in global shipments, reaching a seasonal low. Port arrivals also decreased, easing supply pressure on iron ore. On the demand side, the resumption of blast furnace operations at steel mills drove a continuous increase in pig iron production. Meanwhile, pre-holiday restocking by steel mills remained incomplete, providing support for spot prices. As a result, iron ore prices fluctuated upward this week. In terms of port prices, PB fines in Shandong rose by 5-10 yuan/mt WoW.
Looking ahead to next week, global shipments are expected to remain low due to the rainy season in the Southern Hemisphere, though port arrivals may see a slight increase. On the demand side, as the Chinese New Year approaches, most steel mills are maintaining current production levels, with limited increases in pig iron production. Additionally, as pre-holiday restocking has been completed, spot transactions are expected to stagnate, with minimal price fluctuations. Post-holiday, attention should be paid to industry chain data pressure and the pace of downstream demand recovery. Overall, current industry imbalances are relatively small, and the macro environment remains mild. Iron ore prices are expected to continue fluctuating upward next week and in the first week after the holiday.

Coke: Post-Holiday Restocking by Steel Mills May Provide Slight Upside Room for Coke Prices

Key Insights: On the supply side, coke enterprises are experiencing profit compression, with some incurring losses, though still within tolerable limits. Overall, production levels remain unchanged, and coke inventories at coke enterprises continue to build up. On the demand side, as the Chinese New Year approaches, the market is gradually entering holiday mode, with demand remaining sluggish and the coke market fundamentally loose. On the raw material side, coal mines are entering the holiday period, with production gradually declining. Additionally, heavy snow and cold weather may disrupt transportation, causing supply fluctuations. However, profit compression at coke enterprises has reduced their enthusiasm for raw material procurement, leading to purchasing as needed. In summary, the coke market is expected to remain stable before the Chinese New Year, with slight upside room for coke prices post-holiday due to restocking by steel mills.

Rebar: Winter Stockpiling Reduction Concentrated at Steel Mills, Post-Holiday Prices May See Some Upside

This week, construction steel spot prices remained stable overall. As the Chinese New Year approaches, merchants and downstream end-users across various markets have gradually started their holiday breaks, leading to stable spot prices and minimal transactions. On the supply side, this week, blast furnace steel mills added new maintenance, with an impact of 1.7537 million mt, up 64,800 mt WoW. Additionally, electric furnace steel mills have concentrated on halting production for the annual break, leading to an overall supply reduction. On the demand side, as migrant workers gradually return home, downstream end-users have also entered the holiday period. Apart from some ongoing construction projects, overall demand has declined significantly. This week, national construction steel inventory continued to increase, but current inventory remains at a five-year low YoY, with production also at a relatively low level. Although demand has stalled due to the holiday, post-holiday inventory buildup pressure may not be significant. In summary, during the Chinese New Year, the domestic macro environment will remain in a vacuum period. Post-holiday, the market's expectations for key meetings and the significant reduction in winter stockpiling this year, with resources concentrated at steel mills, may provide some upside room for prices. The RB2505 contract is expected to fluctuate rangebound before the holiday, with upward momentum after the holiday.

HRC: Pre-Holiday HRC Futures May Stabilize, Focus on Macro Changes During the Holiday

This week, HRC futures and spot prices fluctuated rangebound. On the fundamentals side, HRC production increased by 20,900 mt WoW, adding supply pressure. Futures performed weakly this week, coupled with merchants and end-users in some regions gradually starting their holiday breaks, resulting in limited demand release. Overall, social inventory began pre-holiday buildup, but steel mills actively shipped products, reducing in-plant inventory. As a result, total inventory reached 4.356 million mt, up 145,300 mt WoW. Looking ahead, there are no new maintenance plans for hot rolling, and steel mills' production enthusiasm remains moderate. As the Chinese New Year holiday officially begins next week, demand will stagnate, and post-holiday inventory is expected to continue building up. However, current winter stockpiling demand is relatively small, and post-holiday inventory buildup may exceed expectations. In summary, the domestic macro environment will remain in a vacuum period during the holiday. Attention should be paid to changes in US-China relations and progress on Trump's tariff policies. If tariff policies are unfavorable, it may lead to a pullback in futures at the start of the year. However, with domestic defensive policies in place, the HC2505 contract is expected to have rebound momentum, while pre-holiday futures may remain rangebound.

Steel Scrap: Weak Supply and Demand, Prices to Remain Stable

As the Chinese New Year approaches, the market has entered a holiday atmosphere. Although some steel mills have slightly raised steel scrap procurement prices to attract supply and ensure normal production, most steel scrap traders have already started their holiday breaks, and the number of mills halting scrap collection has increased, leading to reduced overall arrivals. Looking ahead, transactions in steel markets across regions have essentially stalled, and downstream enterprises have also concentrated on holiday breaks. Under weak supply and demand conditions, steel scrap prices are expected to fluctuate rangebound in the short term, with a fluctuation range of (-50, 50) yuan/mt. If downstream operations resume well post-holiday, it may support an upward trend in steel scrap prices.

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