[SMM Hot Topic] Cold-Hot Price Spread Plunges 6%, When Will the Decline Bottom Out?

• Price decline of cold-rolled coil greater than that of HRC, cold-hot price spread narrowed by 6% in April

In April, the cold-hot price spread narrowed sharply. According to SMM data, as of April 25, the nationwide average price of cold-rolled coil fell by 3.5% MoM from the March average, while the nationwide average price of HRC fell by 2.9% MoM from March. The average cold-hot price spread decreased from 699 yuan/mt in March to 655 yuan/mt, narrowing by 6.4% MoM.

• Divergent supply and demand performance, cold-hot price spread narrowed under pressure

According to SMM data, as of April 27, the total nationwide inventory of HRC decreased by 10.8% compared to month-end March, while the total inventory of cold-rolled coil increased slightly by 3.5% compared to month-end March. During the peak season of "Golden March, Silver April" when inventory de-stocking should have been normal, the inventory of cold-rolled coil increased instead of decreasing...

From a fundamental perspective, from March to April, cold-rolled coil production continued to fluctuate at a high level. However, due to the combined effects of earlier maintenance at steel mills, coupled with the decline in profitability of HRC production at steel mills starting from late March, and the diversion of pig iron at some steel mills, the recovery of HRC production was relatively slow.

However, on the demand side, since late February, the US has been wielding the "tariff stick," and the Sino-US tariff war has continued to escalate. It is understood that, affected by changes in tariff policies, there was a wave of "panic exports" among downstream enterprises in Q1, which to some extent depleted demand. In addition, since April, export pressure has surged for home appliance enterprises, mainly small and medium-sized, and export business to the US has stalled for most enterprises. While exports have been impacted, the release of domestic demand has been slightly weaker than expected. This has led to weak inventory de-stocking of cold-rolled coil since month-end March, with inventory starting to accumulate continuously in April. The increase in cold-rolled coil inventory while HRC inventory continued to de-stock well resulted in a significantly greater price decline for cold-rolled coil than for HRC.

• A sharp decline in cold-rolled coil profits may lead to production adjustments at steel mills, with limited further decline in cold-hot price spread

Looking ahead, as of April 25, the profit per mt of cold-rolled coil production at blast furnace steel mills has fallen below 50 yuan, while the profit for HRC remains around 100 yuan. A few steel mills have already shifted production from cold-rolled to HRC. Given the severe inversion of cold-rolled and HRC profits, this may lead to corresponding adjustments in the production plans of some steel mills. SMM expects that the domestic cold-rolled coil production of steel mills will decline in May, and supply pressure will also ease accordingly.

From a demand perspective, in the home appliance industry, according to the latest production schedule report for the three major white goods released by ChinaIOL, the total scheduled production of air conditioners, refrigerators, and washing machines in May 2025 is 38.21 million units, up 5.9% from the actual production in the same period last year. With major promotional events such as "May Day Golden Week" and "618" approaching, there is still certain anticipation for demand from downstream industries such as home appliances and automobiles in May. Additionally, in terms of exports, domestic enterprises are actively developing other markets besides the US, and the increase in orders from markets outside the US has been evident recently. Entering May, the imbalance between supply and demand for cold-rolled coil is expected to ease, and SMM believes that the further decline in the cold-hot price spread will be limited in May.