The tariff war continues to escalate, steel prices are expected to maintain sideways movement next week [SMM Steel Industry Chain Weekly Report]

Forecast for Next Week: Tariff War Escalates, Steel Prices to Continue Sideways Movement

This week, the ferrous metals series showed a mixed trend, with the overall average price moving slightly upward. On the news front, Chinese Premier Li Qiang, while attending the "China Development Forum 2025 Annual Meeting," stated that China has prepared for potential "external unexpected shocks" and will introduce new incremental policies if necessary to ensure the stable operation of the Chinese economy. On the 22nd, the 2025 High-Quality Development Conference for the Steel Industry, guided by the China Iron and Steel Association and hosted by the China Metallurgical Industry Planning and Research Institute, was held in Beijing. Jiang Wei, in his speech at the conference, suggested effectively closing the entry for new capacity, and some regional steel enterprises in China indicated that they might appropriately control crude steel production in the near future. Mid-week, the Ministry of Finance's report on the implementation of China's fiscal policy in 2024 mentioned that the fiscal policy in 2025 should be more proactive, continuously and more forcefully supporting the comprehensive expansion of domestic demand. Additionally, the Ministry of Ecology and Environment released the "Work Plan for the National Carbon Emission Trading Market to Cover the Steel, Cement, and Aluminum Smelting Industries," marking the first expansion of the industry coverage of the national carbon emission trading market. In the spot market, steel prices jumped initially and then pulled back this week, with poor market sentiment in the latter half of the week and weak spot transactions.

Looking ahead to next week, domestic production restriction rumors and the ongoing global tariff war will continue to disturb the market. On the industrial side, blast furnaces are gradually resuming production, pig iron production continues to increase, and raw material price support is strengthening. In terms of steel, apparent demand continued to rebound this week, but the growth rate slowed down MoM. It is expected that steel prices will continue to fluctuate rangebound next week, with no strong driver to break through the current upper and lower limits.

Iron Ore: Iron Ore Prices Strengthen, Expected to Continue Upward Fluctuation Next Week

Looking ahead to next week, although steel mill profits are marginally narrowing, they remain resilient. Supported by the traditional peak demand season, the consumption of major steel products is expected to continue to increase slightly, with total inventory maintaining a destocking trend. With low inventory operations, steel mills have high production enthusiasm, and pig iron production still has room to rise. Additionally, the release of restocking demand from some steel mills before the Qingming holiday is expected to continue to strengthen iron ore consumption, supporting ore prices. However, it should be noted that the unresolved crude steel production restriction policy continues to disturb the market, and the new US tariffs on China, effective on April 2, are exacerbating risk aversion. Moreover, the imminent contract rollover of the most-traded contract may amplify futures market fluctuations. Overall, it is expected that iron ore prices will continue to fluctuate upward next week, but the upside room may be relatively limited due to policy uncertainty.

Coke: Rigid Demand for Coke Increases, Coke Market May Stabilize Next Week

Key Points: In terms of supply, most coke enterprises still have profits. Based on profit strategies, coke supply is relatively stable, and shipment conditions have improved, with coke enterprise inventory continuing to decline. In terms of demand, recent steel mill finished product inventory has been declining, and profits are good, with pig iron production continuously increasing, creating rigid procurement demand for coke, reducing control over arrival conditions. In terms of raw material fundamentals, coking coal production in coal mines is stable, maintaining normal production rhythms. However, recent improvements in steel mill sales and gradual resumption of production have reduced the sentiment to suppress raw material prices, increasing purchase enthusiasm. Online auctions have seen more rises than falls, and the market transaction atmosphere has improved. In summary, downstream rigid demand for coke has increased, and the short-term supply-demand imbalance for coke has weakened. The coke market may stabilize this week.

Rebar: Terminal Restocking Demand Before the Holiday, Building Material Prices May Have Upward Momentum Next Week

This week, rebar prices rose and then stabilized. The upward movement of rebar futures drove both market volume and price, but market merchants operated cautiously, focusing on shipments after the rise, which somewhat suppressed the height of the increase. On the industrial side, several steel mills in Xinjiang, to continue implementing the Xinjiang crude steel production control, announced a daily crude steel production cut of 10% starting immediately. SMM actively followed up and learned that this production cut is mainly for short-term control. Additionally, individual steel mills in the northwest are upgrading their rolling lines, which will reduce building material supply by 20% in April. Other regions' blast furnace steel mills are maintaining their current production rhythms, while the operating rate of 50 main building material electric furnace steel mills nationwide is 39.68%, down 0.5% WoW. The operating rates in east China and central China have slightly declined, mainly due to reduced profits leading to shorter operating hours. In the short term, the operating rate is more likely to decrease than increase, with overall building material supply fluctuating rangebound. On the demand side, the price increase this week drove some speculative demand activity. However, downstream terminals, affected by low fund availability, saw demand recovery strength lower than market expectations, with overall market sentiment remaining cautious. National rebar inventory continued to decline this week, but the destocking range did not significantly expand. Looking ahead, after this week's price increase, market merchants focused on shipments and were cautious about restocking. However, some terminals may restock before the Qingming holiday next week. It is expected that building material spot prices will remain relatively stable with a strong trend next week, and the most-traded rebar contract RB2505 may fluctuate between 3,100-3,300.

HRC: Supply-Demand Structure Temporarily Maintained, HRC Futures May Continue Narrow Fluctuations Next Week

This week, HRC futures prices rose initially and then fell, with a narrow weekly fluctuation range. On the fundamental side, some steel mills still have maintenance plans within this week, with HRC production fluctuating rangebound. Market transactions rose initially and then fell, with traders showing strong shipment enthusiasm. Social inventory decline expanded, and steel mills actively shipped, resulting in a total inventory of 5.4255 million mt, down 283,800 mt WoW. Looking ahead, entering April, steel mill maintenance will temporarily end. Driven by substantial profits, production will increase, but the short-term growth rate will not be that large. Downstream manufacturing demand can still maintain resilient release, and inventory is expected to continue destocking next week. According to the SMM survey, pig iron will continue to rebound, and cost support will remain stable. Overall, HRC will maintain seasonal destocking in the short term, with macro factors in a vacuum period. HRC apparent demand is at a high level, and attention should be paid to the sustainability of demand, guarding against a demand pullback that could cool market sentiment. It is expected that the HC2505 contract may fluctuate between 3,330-3,430 next week.

Steel Scrap: Supply-Demand in Tight Balance, Follow-Up Focus on Demand Recovery

On the supply side, steel scrap resources are relatively tight, with merchants operating in a fast-in, fast-out mode. Steel scrap yards face significant purchase pressure, and overall arrival conditions are poor. On the demand side, blast furnace steel mills have reduced their willingness to use steel scrap due to its cost-performance disadvantage, but the steel scrap ratio has slightly increased due to seasonal demand recovery. Electric furnace steel mills have slightly reduced operations due to poor profitability, with the operating rate of electric furnace steel mills at 39.68% this week, down 0.5% WoW, and demand has contracted. Overall, the supply-demand for steel scrap is currently in a tight balance, with some recovery in demand but overall still weak. Follow-up focus should be on demand recovery.

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