Two Sessions Approaching: Steel Prices Stuck in a Dilemma?! [SMM Steel Industry Chain Weekly Report]

Forecast for Next Week: Two Sessions Approaching, Steel Prices Stuck in a Dilemma?!

This week, the ferrous metals series fluctuated downward. On the news front, internationally, on February 21, Vietnam announced anti-dumping duties of 19.38%, 26.94%, and 27.83% on Chinese steel products exported to Vietnam. On February 20, South Korea's Ministry of Trade, Industry, and Energy held a meeting to initiate a preliminary investigation into "carbon steel and other alloy steel hot-rolled steel plates and thick plates" imported from China. Additionally, nearing the weekend, the US President announced that the proposed tariffs on Mexico and Canada would take effect as scheduled on March 4, with an additional 10% tariff on Chinese goods also set to take effect on the same day. Domestically, mid-week, rumors about crude steel production cuts circulated in the market. According to the rumors, crude steel production is expected to be reduced by 50 million mt in 2025, 20 million mt in 2026, and 10 million mt in 2027, temporarily boosting finished steel prices. On the industrial side, the tenth round of coke price cuts was implemented, and iron ore prices were weak due to rumors of crude steel production cuts. On the steel side, market sentiment was cautious this week, and high-priced transactions were sluggish.
In the short term, the number of newly added annual maintenance blast furnaces has increased recently, and pig iron production is expected to continue its downward trend next week. With the Two Sessions approaching, short-term macro expectations are about to peak. However, steel demand is slowly rebounding in reality, and with neither expectations nor reality fully verified, steel prices lack upward or downward momentum. Next week, prices are expected to continue fluctuating in the range of rb2505 (3,250-3,400) and hc2505 (3,350-3,450). Attention should be paid to changes in supply-side production controls and exports.

Iron Ore: Two Sessions Approaching, Weak Expectations for Stimulus Policies; Iron Ore Prices Expected to Decline Further

This week, imported iron ore prices fluctuated downward. The main reason for the pullback from highs was the weakening of fundamental support: SMM shipping data showed that global iron ore shipments increased by 8.7% WoW, port arrivals grew slightly by 5.8% WoW, while daily pig iron production declined slightly by 5,500 mt, with increased supply and reduced demand putting pressure on ore prices. Additionally, macro-level news disturbances increased, particularly rumors of a "50 million mt crude steel production cut in 2025," which intensified market pessimism. However, downstream demand continued to recover, with apparent demand for the five major steel products steadily rebounding, providing some support for iron ore prices. Regarding port prices, PB fines in Shandong fell by 5-10 yuan/mt WoW. Looking ahead to next week, with the Two Sessions approaching, the market still holds expectations for stimulus policies. However, considering the current economic and political situation, the likelihood of exceeding expectations is low, and the meeting results may fall short of market expectations. From a fundamental perspective, shipments from Australia and Brazil still have significant room for growth, but port arrivals may decline significantly due to previous shipment reductions. On the demand side, according to SMM's blast furnace maintenance plan, daily pig iron production is expected to continue to decline slightly next week, and short-term supply remains loose. Overall, after the Two Sessions, market sentiment may weaken, and price logic will return to fundamentals. SMM expects iron ore prices to show a high-to-low trend next week, with the price center likely to decline.

Coke: Supply Tightens, Costs Stabilize; Coke Market May Remain Stable Next Week

Key Point: On the supply side, after the tenth round of coke price cuts, most coke producers faced losses, with limited room for further cost reductions. Profit recovery for coke producers is challenging, and some have reduced operations, leading to a decline in coke supply. On the demand side, end-use demand was moderate, and steel mills' pig iron production declined slowly, reducing daily coke consumption. Additionally, steel mills' coke inventories remained at reasonable levels, with most purchasing coke as needed. Regarding raw materials, coking coal supply was sufficient, and coal mines still faced significant sales pressure. However, after a prolonged period of price declines, the downside room for coking coal prices is limited, and price reductions have slowed. Even though downstream acceptance of current coking coal prices remains low, significant further price declines are unlikely. In summary, coke supply has begun to tighten, cost support has stabilized, and the market still holds positive expectations for policies from the Two Sessions. The coke market is expected to remain stable next week.

Rebar: Market Sentiment Unstable; Prices May Weaken If Meeting Falls Short of Expectations

This week, rebar spot prices first declined and then rebounded, but the nationwide average price fell WoW. During the week, rumors of a 50 million mt steel production control target for 2025 caused a rapid surge in futures, boosting market sentiment and speculative demand, with end-user purchases also increasing. On the fundamentals, this week saw both new resumption and maintenance of production at blast furnace steel mills, keeping production relatively stable, while operating rates at EAF steel mills continued to rise, leading to a slight increase in overall supply. On the demand side, recovery in south China outpaced that in the north, with end-use demand intensity steadily improving, while speculative demand was more influenced by sentiment. Regarding inventory, total rebar inventory this week was 8.0714 million mt, up 1.76% WoW, with the growth rate continuing to narrow. Notably, steel mill inventories shifted from increasing to decreasing, mainly due to the moderate recovery of direct supply shipments from some mills. Looking ahead, with the Two Sessions approaching, market expectations have weakened compared to earlier. Additionally, as March begins, demand in the north is expected to recover rapidly. With little change in supply, the gradual recovery in demand intensity will provide some support for spot prices. However, market sentiment may be released after the meeting, leading to spot price adjustments. Rebar spot prices are expected to stabilize first and then weaken next week, with the most-traded RB2505 contract likely to fluctuate in the range of 3,250-3,400.

HRC: Two Sessions Expectations May Fall Short; HRC Faces Downside Risk Next Week

This week, HRC futures prices showed an inverted "N" trend, with closing prices stabilizing WoW. On the fundamentals, some steel mills in north China added new rolling line maintenance plans this week, leading to a 7,300 mt WoW decline in HRC production, slightly reducing supply. During the week, anti-dumping measures dampened market purchasing enthusiasm, marginally weakening both supply and demand. Social inventory accumulation increased significantly, while steel mills actively shipped products. As a result, total inventory reached 5.9376 million mt, up 54,800 mt WoW. Looking ahead, some steel mills still plan new maintenance, which may ease supply pressure. With the Two Sessions approaching and anti-dumping sentiment fading, suppressed end-use demand is expected to be released, potentially reducing inventory next week. According to the SMM survey, short-term pig iron production is expected to fluctuate rangebound, and cost support remains uncertain. Overall, HRC supply and demand are in continuous recovery. Next week's trading focus will be on the Two Sessions. As market expectations for domestic policies decline, once the Two Sessions conclude, there may be a downside risk. The HC2505 contract is expected to rise first and then fall next week, fluctuating in the range of 3,350-3,450.

Steel Scrap: Market Cautiously Observing; Steel Scrap Prices May Continue to Fluctuate

Affected by market news, rebar futures and spot prices first fell and then rose this week, with overall price fluctuations being significant. Market sentiment was unstable, and steel scrap producers accelerated shipments, leading to a slight increase in arrivals at steel mills. On the supply side, the circulation of steel scrap resources in the market remained relatively low, with purchase volumes at low levels. On the demand side, blast furnace steel mills maintained normal production, while most EAF steel mills resumed production, though profitability continued to decline, limiting enthusiasm for scrap purchases in the short term. Overall, the steel scrap market currently faces relatively small imbalances. Therefore, steel scrap prices are expected to remain rangebound in the short term, fluctuating within the range of (-50, 50) yuan/mt.

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