Real Demand Faces Challenges, Limited Short-Term Fluctuation in Steel Prices [SMM Steel Industry Chain Weekly Report]

Forecast for Next Week:Real Demand Faces Challenges; Limited Upside and Downside for Steel Prices in the Short Term

This week, the ferrous metals series first declined and then stabilized. On the news front, early in the week, Tangshan City initiated a Level II emergency response to heavy pollution weather, leading to production halts at local independent rolling mills and production adjustments at some blast furnace steel mills. Mid-week, the Two Sessions officially commenced, emphasizing a "more proactive" fiscal policy stance, implementing moderately loose monetary policies, timely RRR cuts and interest rate cuts, maintaining ample liquidity, and promoting the healthy development of the real estate and stock markets with greater efforts. In the steel industry, the NDRC reiterated crude steel production control, stating that it will continue to implement crude steel production control and promote the restructuring of the steel industry. In the spot market, steel prices retreated under pressure this week, with a phased increase in spot market transactions.
In the short term, considering the gradual weakening of the impact of environmental protection-driven production restrictions and the resumption of blast furnaces after maintenance, pig iron production is expected to increase slightly next week, strengthening support for ore prices. For steel, overall inventory remains relatively low, and domestic trade orders at steel mills are moderate. Coupled with the steady increase in downstream operating loads in March, demand has room for further growth, with relatively small imbalances in the industry. The Two Sessions will conclude on the 11th, and the macro impact will gradually diminish as real demand enters a critical verification period. Steel prices are expected to be supported by policies at the lower end, while being constrained at the upper end by export sanctions and the slow pace of resumption in outdoor projects. Steel prices are anticipated to fluctuate within a limited range next week.

Iron Ore: Increased Supply and Weakened Demand Intensify Market Pessimism

This week, imported iron ore prices continued to decline significantly. On one hand, the confirmation of crude steel production restrictions for 2025 during the Two Sessions greatly intensified bearish market sentiment. On the other hand, news of the US continuing to impose additional tariffs on Chinese products deepened pessimism about future demand prospects. From a fundamental perspective, global iron ore shipments have significantly rebounded, but pig iron production remains in a slight decline, failing to provide effective support for ore prices. Regarding port prices, PB fines in Shandong fell by 25-30 yuan/mt WoW.
Looking ahead to next week, as the Two Sessions conclude, the macro expectation phase will end, and market logic will return to fundamentals. Blast furnaces that were halted for maintenance during the Two Sessions will gradually resume production, with pig iron production expected to shift from decline to growth and continue increasing over the next three weeks. On the supply side, although global shipments have rebounded to high levels, port arrivals remain low, and port inventories continue to decline. Fundamental factors are expected to provide strong support for ore prices, potentially driving a bottom-out rebound. However, given the ongoing interference from crude steel reduction policies and tariff news, the upside room for ore prices will be limited, with next week's ore prices expected to fluctuate within a narrow range.

Coke: Demand Expected to Weaken; Possibility of the Eleventh Round of Price Cuts Next Week

Key Point:On the supply side, coke production remains stable, with supply still relatively loose. On the demand side, most steel mills in Tangshan have recent maintenance plans, and if implemented as planned, steel mills' enthusiasm for coke procurement will further decline. On the macro front, major meetings emphasized the continued promotion of traditional industry transformation and upgrading, the sustained implementation of crude steel production control, and the restructuring of the steel industry. Regarding raw material fundamentals, recent safety inspections have intensified, with coal mines prioritizing safe production, keeping supply temporarily stable. However, coke prices are still expected to decline, with downstream buyers maintaining a strong wait-and-see sentiment and primarily purchasing coking coal as needed. In summary, with demand expected to weaken and the Two Sessions policies not exceeding market expectations, the short-term coke market may operate stably with a weak trend, and there is a possibility of the eleventh round of price cuts for coke.

Rebar: Inventory Turning Point Emerges; Demand Strength Awaits Verification, Prices Expected to Fluctuate Rangebound Next Week

This week, rebar spot prices fluctuated downward, with cautious sentiment in the spot market. At the beginning of the month, the Two Sessions did not introduce any substantial favorable policies, and the market was stirred again by the crude steel reduction target for 2025, with actual implementation yet to be verified. On the supply side, the resumption of blast furnaces in March outpaced maintenance, leading to a certain increase in pig iron production, while construction steel production also rose. The operating rate of EAF steel mills increased to 41.3%, but according to the SMM survey, the current difficulty in sourcing steel scrap has not improved, and profitability remains poor. Some steel mills have started to incur losses, while those with profits are only marginally profitable, making it difficult for operating rates to increase significantly. Regarding inventory, social inventory increased while in-plant inventory decreased this week, marking a turning point as overall inventory shifted from growth to decline. Looking ahead, demand recovery in northern regions is expected to accelerate in March, with market expectations for "Golden March and Silver April." With reduced macro disturbances, trading will return to fundamentals, with limited supply growth and the arrival of the inventory turning point, while demand strength awaits verification. Rebar prices are expected to fluctuate rangebound next week, with the most-traded RB2505 futures contract likely to fluctuate between 3,200-3,340 yuan.

HRC: Fundamentals Improve; HRC Market Expected to Fluctuate Next Week

This week, HRC prices fluctuated downward. In the spot market, demand was moderate, with end-users primarily purchasing as needed, and overall market transactions lacked highlights. Looking ahead, on the macro front, major meetings emphasized the continued promotion of traditional industry transformation and upgrading, the sustained implementation of crude steel production control, and the restructuring of the steel industry. On the cost side, iron ore prices rebounded slightly, while coke is expected to undergo the eleventh round of price cuts, resulting in weak and stable cost support for HRC. Regarding fundamentals, HRC supply decreased while demand increased, with end-use demand performing moderately and HRC inventory overall maintaining a downward trend. In summary, HRC fundamentals have improved, and in the long term, significant reductions in steel production are expected to support market expectations. The most-traded HRC futures contract is expected to fluctuate between 3,330-3,530 yuan next week.

Steel Scrap: Weak Supply and Demand; Prices Expected to Fluctuate in the Short Term

On the supply side, with the gradual recovery of steel scrap production and the resumption of operations at processing bases across regions, the supply level of steel scrap continues to rise. However, due to relatively low inventory levels, the overall increase in circulating steel scrap resources remains limited. On the demand side, EAF steel mills have largely resumed production, but constrained by shrinking steel mill profits, the resumed EAF mills are generally operating below capacity. According to the SMM survey, the operating rate of 50 major EAF steel mills producing construction steel nationwide was 41.3% this week, up 3.08% WoW, while the capacity utilization rate was 41.46%, up 2.14% WoW.Overall, the steel scrap market currently exhibits weak supply and demand. Significant increases in supply and demand are unlikely in the short term, and steel scrap prices are expected to maintain a fluctuating trend next week.

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