[SMM Steel Morning Meeting Summary] Risks Still Exist During the Holiday, Suggest Holding Light Positions for the Holiday

Imported Ore:

Yesterday, DCE iron ore futures continued to fluctuate rangebound, with the most-traded contract I2509 closing at 709, up 0.28% for the day. Traders sold goods according to market conditions; steel mills' restocking was nearing completion, with purchases made as needed. The market transaction atmosphere was moderate. In Shandong, the mainstream transaction prices for PB fines were around 762-765 yuan/mt, with prices unchanged WoW. In Tangshan, the transaction prices for PB fines were around 772-780 yuan/mt, up 0-2 yuan/mt WoW. According to SMM statistics, from April 26 to May 2 this week, the impact of blast furnace maintenance on pig iron production was 893,700 mt, a decrease of 25,300 mt WoW from the impact of maintenance last week. The increase in pig iron production significantly narrowed, remaining at a high level. Coupled with some steel mills still having restocking needs, the overall demand for iron ore supported spot prices. However, with production restrictions on crude steel and increased market expectations of weaker downstream demand in the future, iron ore prices struggled to rise. Short-term price increases are difficult, and prices are expected to continue fluctuating rangebound.

Domestic Ore:

The market in western Liaoning was relatively stable, with ex-factory prices for 66% grade wet-based iron ore concentrates (tax excluded) at 700-710 yuan/mt. The region faced another round of municipal safety inspections, with some mines and beneficiation plants facing shutdowns for rectification. The local iron ore concentrate resources remained relatively tight, and the overall sentiment to stand firm on quotes among mines and beneficiation plants remained strong. Steel mills' restocking before the Labour Day holiday was not significant, with purchases mainly made as needed, and overall market transactions did not show significant improvement. The market's game-playing mentality was evident, and it is expected that local iron ore concentrate prices will remain stable in the short term.

  
Coking Coal Market:
The quoted price for low-sulphur coking coal in Linfen was 1,310 yuan/mt. The quoted price for low-sulphur coking coal in Tangshan was 1,370 yuan/mt.
In terms of fundamentals, coal mines maintained normal production, and downstream raw material coking coal inventories were at safe levels. The willingness to restock before the holiday was average. Coupled with a significant cooling of market sentiment, online auctions showed mixed performance, with a high rate of unsold lots, and the market maintained a cautious wait-and-see attitude. In summary, there is an expectation of a short-term correction in coking coal prices.

 
Coke Market:
The nationwide average price for grade 1 metallurgical coke (dry quenching) was 1,680 yuan/mt. The nationwide average price for quasi-grade 1 metallurgical coke (dry quenching) was 1,540 yuan/mt. The nationwide average price for grade 1 metallurgical coke (wet quenching) was 1,340 yuan/mt. The nationwide average price for quasi-grade 1 metallurgical coke (wet quenching) was 1,250 yuan/mt.
In terms of supply, coking enterprises' costs decreased, and increased profits boosted their production enthusiasm, leading to a steady increase in coke production and smooth shipments. Coking enterprises' inventories generally remained at low levels. In terms of demand, pig iron production continued to remain high, and steel mills had a rigid demand for coke. With the Labour Day holiday approaching, some steel mills slightly restocked. In summary, the fundamentals of coke are good, but macro expectations are average, and market sentiment is cautious. The coke market is expected to continue to remain stable in the short term.

HRC:
Yesterday, HRC futures prices showed a weak trend, basically returning to the position before the strong rally on Friday. The most-traded contract closed at 3,210, down 1.27%. Yesterday, spot prices decreased by 10-50 yuan/mt WoW. In terms of supply, the impact of hot-rolled coil maintenance this week was 40,600 mt, unchanged WoW. The impact of hot-rolled coil maintenance next week is expected to be 112,600 mt, an increase of 72,000 mt WoW. Short-term supply will remain high. In terms of demand, some pre-holiday restocking demand was released over the weekend and on Monday, but with significant price fluctuations, overall pre-holiday stockpiling was relatively cautious. In terms of costs, steel mills may have expectations of restocking raw materials before the holiday, but with limited increases in pig iron production, the support from raw materials is neutral. In summary, the imbalance in HRC fundamentals is relatively small, and pre-holiday inventories maintained a good downward trend. There is an expectation that the actual time for demand to weaken will be postponed, and there are still expectations for macro policy efforts. However, in the short term, the pre-holiday time window is short, and the most-traded contract is expected to continue fluctuating rangebound. During the holiday, overseas risks still exist, and it is recommended to maintain a light position during the holiday.

Rebar:

Yesterday, rebar futures fluctuated downward, closing at 3,100, down 1.21% from the previous trading day. In the spot market, quotes in most regions loosened, with declines ranging from 10-30 yuan/mt. Market sentiment significantly weakened compared to the previous two days, and the trading atmosphere was poor. Coupled with the almost completion of pre-holiday restocking, traders mostly maintained a wait-and-see attitude, and overall transaction performance was average. From a fundamental perspective, on the supply side, according to SMM's weekly maintenance survey, the impact of construction steel maintenance this week was 1.1543 million mt, a decrease of 50,000 mt WoW, with a slight increase in supply. However, looking ahead to May, long-process steel mills have good order books for billet exports, with expectations of reducing finished steel production by reselling billets. Short-process steel mills, affected by difficulties in collecting steel scrap and poor profitability, continue to see a downward trend in operating rates. It is expected that the supply pressure on finished steel will ease after the holiday. On the demand side, with futures prices fluctuating downward, market transaction performance was average, with only a small amount of pre-holiday stockpiling demand. With the Labour Day holiday approaching, markets in various regions are gradually closing, and trading enthusiasm is not high, with most maintaining a cautious wait-and-see attitude. Therefore, it is expected that construction steel prices will continue to weaken tomorrow.