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[SMM Holiday Review] Tug-of-War Between Longs and Shorts in Ferrous Metals Series on the First Day After the Holiday, Prices Fluctuate Rangebound

iconFeb 5, 2025 14:48
Source:SMM

During the holiday, ferrous metals series prices fluctuated rangebound with limited transactions. On the first day after the holiday, the price of some common billet resources in Qian'an, Tangshan, dropped by 10 yuan to 3,090 yuan/mt (tax-included ex-factory). By category:

 

【Iron Ore】—— Post-Holiday Strong Supply and Demand, Prices Fluctuate Rangebound

Imported Ore: Due to the suspension of domestic futures trading during the holiday and steel mills having stocked up in advance, there were almost no transactions in the spot market during the holiday. In the seaborne iron ore market, there were no inquiries or transactions on public platforms. Singapore swaps jumped initially and then pulled back, with prices as of yesterday remaining roughly the same as the last trading day before the holiday on January 27, hovering around $105. During the holiday, the most significant market impact came from the US tariff increase event on February 1. Over the past two days, this event has continued to disrupt market prices, with the US delaying the tariff implementation on Mexico and Canada by over 30 days, while no response has been given regarding the 10% tariff on Chinese goods. However, as the market had already anticipated this event, market sentiment remained relatively stable. Fundamentals side, the weather impact on supply from Australia and Brazil has ended, and overseas shipments have returned to normal levels. Regarding pig iron data, post-holiday compared to pre-holiday, six facilities resumed production, and one underwent maintenance, with an estimated pig iron output increase of 28,000 mt. With strong supply and demand, although steel mills have some restocking demand post-holiday, the timing of pre-holiday stockpiling varied, leading to limited demand and insufficient support for ore prices. SMM expects that in the two weeks following the holiday, imported iron ore prices will fluctuate within a narrow range. In the short term, attention should focus on the resumption of work and production by downstream enterprises after the holiday. If demand falls short of expectations, iron ore prices may face the risk of pulling back.

Domestic Ore: As steel mills had stocked up in advance, transactions of domestic iron ore concentrates were limited during the holiday. Compared to pre-Chinese New Year, domestic iron ore prices showed an upward trend, with the largest increase in east China at 20-30 yuan/mt (adjusted based on Platts weekly average prices and exchange rate changes). Prices in Qian'an and Zunhua, Hebei, rose by 1-5 yuan/mt, while prices in Liaoning increased by 5-10 yuan/mt. Currently, some mines in Hebei and Liaoning have not resumed production, with gradual recovery expected after mid-February, leading to relatively tight domestic iron ore concentrate resources. On the demand side, steel mills have certain restocking expectations, which may drive transactions of iron ore concentrates. However, due to significant pressure on steel mill profits, there remains a strong tendency to suppress prices, and restocking speed may fall short of expectations. Under the current circumstances, domestic iron ore concentrate prices are expected to continue fluctuating widely in the short term.

 

【Coking Coal and Coke】—— Post-Holiday Fundamentals Remain Loose, Bearish for Coking Coal and Coke Markets

During the Chinese New Year holiday, the coking coal market remained stable. Fundamentals side, post-holiday, coal mines showed high enthusiasm for resuming production, with coking coal supply gradually increasing. However, downstream purchasing demand remained weak, with insufficient restocking willingness, resulting in low market activity. Coal mines faced pressure to sell, and some market participants maintained a bearish outlook on the subsequent market. Overall, the fundamentals of coking coal remain weak, providing limited support for prices. In the short term, the coking coal market is expected to remain stable with a weak trend.

During the holiday, the coke market also remained stable. Supply side, coke plants maintained stable operations, continuing pre-holiday production levels. However, due to poor logistics efficiency during the holiday, shipments were hindered, leading to an accumulation of coke inventories at coke plants. On the demand side, steel mills maintained stable production rhythms and had sufficient pre-holiday stockpiles, primarily purchasing coke as needed. Overall, coke supply remains relatively loose, and with the possibility of further declines in coking coal prices, cost support is insufficient. The coke market is expected to fluctuate downward in the first week after the holiday.

 

【Steel Scrap】——  Post-Holiday Blast Furnace Mills Slightly Raise Purchase Prices, Profit-Driven Demand Supports Steel Scrap

On the first day after the holiday, steel mills' steel scrap purchase prices were largely stable, with slight increases in north China. As of now, domestic EAF steel mills have not resumed production, with most still shut down and not purchasing. Blast furnace steel mills conducted slight restocking, while the market has not fully resumed operations, leading to tight steel scrap supply and slight price increases by steel mills to secure purchases. Looking ahead, considering that steel mills still have profits, post-holiday production resumption is expected to proceed smoothly, driving a rapid recovery in steel scrap demand and supporting steel scrap prices. However, the upside room will be constrained by finished steel products, and steel scrap prices are expected to fluctuate upward.

 

【Construction Steel】——  Rebar Inventory Build-Up Below Expectations, Weak Demand Leads to Cautious Market Sentiment

During the Chinese New Year holiday, markets across the country were mostly closed, with transactions nearly halted and spot prices largely stable. Most market participants resumed operations between February 5 and 7. From an industrial fundamentals perspective, during the holiday, blast furnace steel mills maintained normal production except for some undergoing year-end maintenance as planned, while EAF steel mills, which traditionally shut down during the holiday, began resuming operations from February 7. Overall, construction steel supply remained at a low level for the year. Regarding inventory, market transactions were nearly halted during the holiday, leading to inventory buildup. In-plant inventory increased more than social inventory, with total inventory levels below the same period in previous years, and overall inventory pressure remained moderate. Looking ahead, market participants maintained a cautious sentiment. This year, winter stockpiling decreased, resulting in weak supply and demand. However, with limited inventory pressure and relatively concentrated resources, spot prices received some support. The future trend of spot prices will depend on the pace of demand recovery. According to the SMM survey, most downstream end-user construction activities will gradually resume from February 7, with full recovery expected by the end of February. Market prices are supported on the downside but face some resistance on the upside. In the short term, construction steel spot prices are expected to fluctuate rangebound.

 

【Flat Steel】——  First Working Day of the Year of the Snake, HRC Prices Fail to Open Strong

During the Chinese New Year holiday, HRC prices in major cities across the country remained stable. In east China, Shanghai and Zhangjiagang saw post-holiday quotations drop by 20-30 yuan/mt following futures market trends, with low willingness to sell among merchants. In Ningbo, prices remained stable before the holiday, with most traders standing firm on quotes and showing low willingness to sell at lower prices, focusing on post-holiday transactions. After the holiday, futures prices dropped significantly, leading to a 10-20 yuan/mt decline in spot prices, with average daily transactions.

In south China, merchants in Lecong gradually resumed operations around the seventh day of the holiday. Influenced by the weak opening of HRC most-traded contracts, spot market quotations declined, with end-users mostly observing. Post-holiday first-day transactions were lackluster.

In north China, the market remained quiet during the holiday. On the first day after the holiday, some mainstream traders resumed operations, showing a strong sentiment to stand firm on quotes. Fundamentals side, steel mills maintained stable production during the holiday. Considering the uneven pace of downstream resumption of work and production after the holiday, the space for post-holiday restocking demand remains to be seen. Overall, HRC prices in north China are expected to remain stable with a weak trend in the first week after the holiday.

In the cold-rolled market, Shanghai cold-rolled prices remained stable compared to pre-holiday levels, with mainstream quotations around 4,250 yuan/mt. According to merchants, most traders resumed operations today, but market trading sentiment remained subdued. The volume of resources stocked during the holiday was moderate, and overall inventory pressure was not significant, with merchants showing a strong sentiment to stand firm on quotes. Overall, the cold-rolled market is expected to remain stable with a weak trend in the first week after the holiday.

Looking ahead, as work and production resume after the holiday, downstream demand will gradually return. Considering the current profitability of steel mills, HRC production in February is expected to remain at a relatively high level, leading to a new round of supply-demand growth competition. Attention should be paid to the turning point of inventory reduction and the speed of destocking. On the news front, macro policies are still "on the way," with expectations for macroeconomic meetings heating up around mid-to-late February. Overall, HRC prices are expected to fluctuate downward in the short term, with a slight upward correction opportunity in mid-to-late February.  

【Key Holiday News Highlights】

【China's January Caixin Manufacturing PMI at 50.1, Remaining Above the 50 Mark for Four Consecutive Months】China's

January Caixin Manufacturing PMI stood at 50.1, down from the previous value of 50.5, marking the fourth consecutive month above the 50 mark. Among the sub-indices of the January Caixin China Manufacturing PMI, performance was mixed. The production index, new orders index, finished product inventory index, production and business expectations index, and supplier delivery time index all rose within the expansion territory. The new export orders index slightly rebounded within the contraction territory, indicating accelerated growth in manufacturing supply and demand, marginal improvement in external demand, and better logistics and corporate expectations in January. Possibly affected by employees returning home early before the holiday, the employment index fell to its lowest level since March 2020 within the contraction territory. The raw material purchase price index dropped from the expansion territory to the 50 mark, while the ex-factory price index remained in the contraction territory for the second consecutive month, with a larger decline, reflecting stable manufacturing costs but falling sales prices, squeezing profits. To meet the needs of accelerated production and building safety inventories, companies continued to increase purchases, but the growth rate slowed, with the raw material inventory index slightly declining within the expansion territory.

 【NDRC: Building International Logistics Hub Centers and Bulk Commodity Resource Allocation Hubs】

An official from the National Development and Reform Commission (NDRC) stated that a series of measures will be taken to continuously improve China's logistics infrastructure network, enhance operational efficiency, and promote a sustained reduction in logistics costs across society. The latest data shows that by the end of 2024, the total number of national logistics hubs in China will increase to 151, achieving basic coverage and effective radiation for cities with a regional GDP of over 400 billion yuan. Nearly half of these hubs will be related to industrial development and consumption. Currently, the railway port access rate at major coastal ports and along the Yangtze River trunk line exceeds 90%. In 2024, the container rail-water intermodal volume at national ports is expected to grow by approximately 15% YoY. Multimodal transport is accelerating, and a modern logistics operation system of "corridor + hub + network" is taking shape. Wu Junyang, Deputy Director-General of the Department of Trade and Economic Affairs at the NDRC, stated that the next step will involve deepening railway freight market reforms, innovating multimodal transport service products, accelerating the implementation of railway freight network projects and inland waterway system connectivity projects, and supporting regions with suitable conditions to build international logistics hub centers and bulk commodity resource allocation hubs. These efforts aim to achieve new and greater results in reducing logistics costs across society and better support the construction of a new development pattern.

 【China Development Bank: Continuing to Provide Medium and Long-Term Financing Support for Affordable Housing Construction and Supply】

According to the China Development Bank (CDB), in 2024, the CDB will leverage the affordable housing relending policy to focus on supporting regions such as Guangxi, Jiangsu, Henan, Jilin, and Sichuan in acquiring completed inventory commercial housing for use as allocation-based or rental-based affordable housing, helping related cities absorb nearly 10,000 units of inventory commercial housing. Hu Guanghua, General Manager of the Housing and Urban Development Department at the CDB, stated that the next step will involve continuing to provide medium and long-term financing support for increasing affordable housing construction and supply, effectively addressing housing issues for the public, stabilizing the real estate market, and accelerating the establishment of a new development model for the real estate sector.

 【US Announces 10% Tariff on Chinese Imports, Foreign Ministry and Ministry of Commerce Respond】

On February 1, US President Trump signed an executive order imposing a 10% tariff on goods imported from China.The latest trade protection measure by the US has faced widespread opposition both internationally and domestically.

The White House stated on the same day that the US will raise tariffs by 10% on all goods imported from China, on top of existing tariffs. Trump said this aligns with the "protectionist measures" he supports.

A spokesperson for China's Ministry of Foreign Affairs previously stated that China has repeatedly expressed its position, firmly believing that trade wars and tariff wars have no winners. China remains steadfast in safeguarding its national interests. A spokesperson for China's Ministry of Commerce also previously stated that China's stance on tariff issues has been consistent. Tariff measures are detrimental to both China and the US, as well as the entire world.

According to an executive order, the US will also impose a 25% tariff on goods imported from Mexico and Canada, with a 10% tariff increase specifically on Canadian energy products.

 

[Customs Tariff Commission of the State Council: Starting February 10, 2025, Additional Tariffs of 10% or 15% Will Be Imposed on Certain US-Origin Goods] The Customs Tariff Commission of the State Council announced on February 4 that on February 1, 2025, the US government declared a 10% tariff hike on all Chinese goods exported to the US, citing issues such as fentanyl. The unilateral tariff hike by the US seriously violates WTO rules, does not help resolve its own issues, and disrupts normal economic and trade cooperation between China and the US.

In accordance with the "Customs Law of the People's Republic of China," the "Foreign Trade Law of the People's Republic of China," and other relevant laws and international legal principles, and with the approval of the State Council, additional tariffs will be imposed on certain US-origin goods starting February 10, 2025. Details are as follows:

1. A 15% tariff will be imposed on coal and liquefied natural gas.

2. A 10% tariff will be imposed on crude oil, agricultural machinery, large-displacement vehicles, and pickup trucks.

3. For US-origin goods listed in the annex, additional tariffs will be imposed on top of the current applicable tariff rates. Existing bonded and tax reduction/exemption policies remain unchanged, and the additional tariffs will not be exempted.

 

[Yunnan to Launch Over 16 GW of New Energy Projects This Year] According to the Yunnan Provincial Development and Reform Commission, Yunnan's clean energy development will continue to accelerate in 2025, with over 16 GW of new energy projects expected to commence construction throughout the year. In 2024, Yunnan's clean energy development accelerated significantly, with 16.12 GW of new energy capacity added during the year. Total new energy capacity surpassed 50 GW, becoming the province's second-largest power supply. The province's total installed power capacity exceeded 150 GW. Meanwhile, power supply capacity continued to improve, with total annual power generation reaching 464.6 billion kWh (up 12% YoY) and total annual electricity consumption across society reaching 278.8 billion kWh (up 11% YoY).

 

[February 2025 Production Schedule for Air Conditioners, Refrigerators, and Washing Machines Totals 29.14 Million Units, Up 30.6% YoY] According to the latest production schedule report for the three major white goods released by ChinaIOL, the February 2025 production schedule for air conditioners, refrigerators, and washing machines totals 29.14 million units, up 30.6% YoY. By product, the production schedule for household air conditioners in February is 15.93 million units (up 35.6% YoY), refrigerators 6.32 million units (up 29.2% YoY), and washing machines 6.89 million units (up 21.3% YoY).

 

[Canada to Impose 25% Tariff on US Products Worth CAD 155 Billion] Canadian Prime Minister Trudeau stated on February 1 local time at a press conference addressing US tariffs that, in retaliation, Canada will impose a 25% tariff on US products worth CAD 155 billion. Of these, CAD 30 billion worth of goods will take effect on February 4, and CAD 125 billion worth of goods will take effect within 21 days. Trudeau also mentioned that Canada is considering several non-tariff measures, including those related to critical minerals, energy procurement, and other partnerships. On February 1 local time, the US government announced a 25% tariff hike on goods imported from Canada and Mexico.

 

[Mexican President Announces Tariff Hike on US] Mexican President Sheinbaum announced on February 1 local time that Mexico will impose tariffs on the US. On the afternoon of February 1 local time, US President Trump signed a tariff order, announcing a 25% tariff hike on Mexican goods exported to the US. Subsequently, Mexican President Sheinbaum stated that Mexico will take countermeasures and has instructed Mexico's Minister of Economy, Ebrard, to activate the Mexican government's previously prepared "Plan B" to impose tariffs on US goods exported to Mexico.

 

[Thai Government Reports Progress on China-Thailand Railway Project: Entire Line to Be Completed and Operational by 2030] Thai government spokesperson Jirayu Houngsub announced on January 29 local time that the first phase of the China-Thailand Railway, the "Bangkok-Korat" section, has progressed by over one-third, while the second phase, the "Korat-Nong Khai" section, has completed its design work. The entire line is expected to be operational by 2030.

 

 

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