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This week, the ferrous metals series showed a trend of initially declining and then rebounding. On the news front, numerous "short articles" were released, including reports that Shanxi representatives of state-owned coal mines are reducing this year's task volume and that detailed rules for crude steel production cuts may soon be officially issued, rapidly boosting market bullish sentiment. On March 13, the National Development and Reform Commission (NDRC) released a report on the implementation of the 2024 National Economic and Social Development Plan and the draft plan for 2025, stating that the main tasks for 2025 will continue to include crude steel production control and promoting the restructuring of the steel industry. Additionally, Ni Hong, Minister of Housing and Urban-Rural Development, stated at the livelihood-themed press conference of the Third Session of the 14th National People's Congress that efforts will be made to implement a series of urban renewal projects aimed at benefiting people's livelihoods, promoting development, and mitigating risks. In terms of livelihood projects, all urban old residential communities built before 2000 will be included in urban renewal and renovation plans. In the spot market, mid-week saw HRC and rebar futures "turn red," significantly improving market sentiment, with active spot transactions in multiple regions.
In the short term, rumors of production cuts continue to ferment, raw material prices face resistance, and the eleventh round of coke price cuts has been implemented. On the steel side, inventories continued to decline this week, with no significant imbalance in fundamentals for now. Steel prices are expected to fluctuate upward in the short term, with attention on the pace of production increases amid expanding profits for steel mills.
Iron Ore: Imported Ore Prices Initially Weak but Strengthened, Expected to Break Upward Next Week
This week, iron ore prices showed a trend of initially weakening and then strengthening. In the first half of the week, demand slightly declined due to heavy pollution weather in Tangshan, leading to blast furnace production cuts at some steel mills. As the weather improved, sintering machines and blast furnaces resumed operations, and demand recovered. Coupled with low iron ore prices, steel mills increased restocking. From a fundamental perspective, global shipments remained high, but port arrivals dropped significantly, and port inventories continued to decline, remaining relatively low YoY, with limited supply pressure. On the demand side, daily pig iron production at sample steel mills this week averaged 2.3719 million mt, up 7,900 mt WoW, showing a notable increase. On the supply side, port arrivals dropped significantly this week, while port pick-up volumes increased, leading to a destocking trend in port inventories. Apparent demand for the five major steel products continued to rise, with total inventories declining, and market expectations remained optimistic. On the macro front, frequent news of crude steel production cuts emerged, but market sentiment remained subdued. At ports, mainstream transaction prices for PB fines in Shandong were around 775-780 yuan/mt, up from last week.
Looking ahead to next week, Australian and Brazilian shipments are expected to gradually recover, with port arrivals likely to increase significantly, potentially adding supply-side pressure. On the demand side, with the peak season approaching, steel demand still has room to grow. Additionally, falling coke prices and improved steel mill profits are accelerating pig iron production growth, supporting iron ore demand. However, the delayed implementation of crude steel production cut policies may limit the rebound potential for iron ore. Overall, iron ore prices are expected to continue breaking upward next week, but the gains may be limited, with attention needed on uncertainties such as weather and policies.
Coke: Crude Steel Reduction Policy Details to Be Released, Twelfth Round of Price Cuts Expected to Land Next Week
Key Point: On the supply side, most coke enterprises may face losses, but these remain within a tolerable range, with only a small number of enterprises reducing production. Coke supply has slightly decreased. On the demand side, the end-use market is gradually recovering, increasing demand for steel and driving up pig iron production at steel mills, which in turn raises daily coke consumption. Some steel mills have started restocking coke. Regarding raw materials, coal mines are maintaining normal operations, with overall coking coal supply remaining ample. However, downstream purchasing enthusiasm is generally low, and order signing at coal mines has fallen short of expectations, leading to significant inventory accumulation at some mines. In summary, while the fundamentals for coke have improved, they remain relatively loose. Coke inventories at coke enterprises remain high, and rumors that crude steel reduction policy details will be released on March 15 further dampen market confidence. The coke market is expected to remain stable with a weak trend next week, with the twelfth round of price cuts likely to land.
Rebar: High Prices Lead to Poor Transactions, Market Caution Increases; Construction Steel Prices Expected to Fluctuate Rangebound Next Week
This week, rebar spot prices initially declined and then rose. On the news front, rumors of coal mine reductions and crude steel production cuts increased, coupled with reports of accidents at raw material mines, driving a collective rally in the ferrous metals series. Spot market prices rose to varying degrees across regions. On the supply side, according to an SMM survey, the impact from maintenance on construction steel production this week was 1.307 million mt, down 39,200 mt WoW. Operating rates at EAF steel mills slightly declined to 40.6%, as major market prices fell, turning profits negative for most EAF mills. Some mills adjusted operating hours, but overall supply still showed a slight increase. Nationwide, rebar in-plant and social inventories both declined this week, continuing the destocking trend. From mid-to-late March, northern demand recovery is expected to accelerate, with inventories likely to continue declining next week. Looking ahead, supply and demand are both expected to increase, with inventories trending downward, maintaining a relatively healthy balance. On the macro front, the NDRC reiterated crude steel reduction policies, but actual implementation awaits official documents. During this week's price rebound, high-price transactions were somewhat sluggish, and market sentiment turned cautious. Construction steel prices are expected to fluctuate rangebound next week, with the most-traded RB2505 contract likely to fluctuate between 3,180-3,380.
HRC: Beware of Macro Disappointments, HRC Futures May Jump Initially and Then Pull Back
This week, HRC futures prices bottomed out and rebounded, with weekly changes reaching 100. On the fundamentals side, HRC production continued to decline by 74,300 mt this week due to maintenance at some steel mills and regional environmental protection measures, easing supply pressure further. After the futures rebound, market purchasing enthusiasm improved, social inventory declines widened, and steel mills actively shipped products. As a result, total inventory stood at 5.7586 million mt, down 148,500 mt WoW. Looking ahead, environmental protection impacts are expected to weaken, with a slight increase in supply anticipated, though not rapidly. Downstream demand from the manufacturing sector remains resilient, and inventories are expected to continue declining next week. According to an SMM survey, pig iron production is expected to continue rising, and the eleventh round of coke price cuts has been implemented, creating room for iron ore prices to rise. Overall, the HRC supply-demand pattern is expected to maintain a seasonal destocking trend. However, macro uncertainties have increased recently, with the NDRC proposing continued crude steel production control but without specifying exact figures. Rumors suggest a reduction of 50 million mt may be announced on the 15th, but the actual situation awaits official documents. Overly aggressive long positions are not recommended, as policy disappointments could lead to pullbacks in futures prices. The HC2505 contract is expected to fluctuate between 3,330-3,480 next week.
Steel Scrap: Inventories Remain Relatively Low, No Significant Imbalance in Fundamentals
On the supply side, as steel scrap bases and upstream waste-generating enterprises tend to maintain low inventory levels, the increase in market circulating resources remains relatively limited. On the demand side, blast furnace steel mills have reduced pig iron costs due to falling coke and other raw material prices, lowering their enthusiasm for using scrap. EAF steel mills, facing poor profitability, have shortened operating hours, negatively impacting future scrap consumption. According to an SMM survey, the operating rate of 50 major EAF steel mills producing construction steel nationwide was 40.6% this period, down 0.7% WoW. Overall, the steel scrap market remains in a relatively balanced state in the short term, with fast resource circulation but limited overall volume. Steel mill inventories are currently at relatively low levels for the same period. Steel scrap prices are expected to remain rangebound next week.
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