[SMM Steel Morning Meeting Summary] Weak Balance of Supply and Demand, Coupled with Favorable Factors Yet to Be Realized, Short-Term Building Materials Market Maintains a Wait-and-See Attitude

Imported Ore:

Yesterday, the Dalian iron ore futures opened high and then fluctuated downward, with the most-traded contract I2509 closing at 708, up 0.35% for the day. Traders' enthusiasm for selling was moderate; steel mills adopted a cautious wait-and-see attitude, with some purchasing as planned, resulting in a generally moderate market transaction atmosphere. In the Shandong region, the mainstream transaction prices of PB fines were around 760-765 yuan/mt, up 0-5 yuan/mt from the previous day. In the Tangshan region, the transaction prices of PB fines were around 770-780 yuan/mt, also up 0-5 yuan/mt from the previous day.

In the morning yesterday, the State Council's press conference unveiled a series of significant macro policy stimulus policy packages, significantly boosting market risk appetite. Meanwhile, the market once again received key signals indicating the imminent implementation of crude steel production reduction policies. Bulls and bears engaged in intense competition around policy expectations and fundamental logic, driving iron ore futures prices to fluctuate considerably. From a fundamental data perspective, according to the latest SMM weekly survey, affected by the postponement of maintenance plans at individual steel mills, the blast furnace operating rate of the sampled steel mills was recorded at 88.96%, up 0.07 percentage points WoW. The daily average pig iron production of the sampled steel mills reached 2.4579 million mt, up 4,400 mt WoW, continuing to maintain a high-level operation trend, providing bottom support for iron ore spot prices. Subsequent focus will be on the implementation of the crude steel production reduction policies.

Domestic Ore:

The market prices of domestic ore in western Liaoning remained stable. The post-holiday restocking by local steel mills supported the sentiment of mines and beneficiation plants to stand firm on quotes. Affected by safety inspections, the overall operating rate of local mines and beneficiation plants remained at a relatively low level, with a more pronounced resource shortage situation and a strong wait-and-see sentiment among mines and beneficiation plants. Steel mills are currently mainly purchasing as needed. Yesterday, the market received news that steel mills in the northeast region had received notices on crude steel production reduction. According to SMM surveys, individual steel mills had received relevant notices, but it was expected that the impact on the demand for iron ore concentrates would be relatively small in the short term. Sellers and buyers are still in a state of competition, and in the short term, the prices of local iron ore concentrates are likely to remain stable.

Coking Coal Market:

The quoted price of low-sulphur coking coal in Linfen is 1,300 yuan/mt. The quoted price of low-sulphur coking coal in Tangshan is 1,370 yuan/mt.

In terms of fundamentals, coking coal supply remained relatively stable. Before the holiday, most downstream coking enterprises had replenished their inventories to reasonable levels. During the holiday, coal mines mainly focused on executing previous orders, with quoted prices fluctuating rangebound. Some coal mines experienced inventory accumulation for certain coal types, leading to a slight pullback in prices. In summary, market participants have a relatively heavy wait-and-see sentiment towards the later coking coal market, and purchases are relatively cautious. This week, coking coal prices are likely to remain in the doldrums.

 
Coke Market:

The nationwide average price of first-grade metallurgical coke (dry quenching) is 1,680 yuan/mt.The nationwide average price of quasi-first-grade metallurgical coke (dry quenching) was 1,540 yuan/mt. The nationwide average price of first-grade metallurgical coke (wet quenching) was 1,340 yuan/mt. The nationwide average price of quasi-first-grade metallurgical coke (wet quenching) was 1,250 yuan/mt.

In terms of supply, most coking enterprises maintained moderate profitability and operated at high rates, with smooth cargo shipments and low inventory levels. On the demand side, steel mills' pig iron production remained high, and production enthusiasm was moderate. However, steel mills' coke inventory was at a reasonable level, resulting in moderate purchase willingness for coke. In summary, the supply-demand imbalance in the coke market was relatively small. However, steel prices fluctuated, and market sentiment leaned towards caution. This week, the coke market may remain stable for the time being.

HRC:

Yesterday, the most-traded HRC futures contract held up well, closing at 3,217, with a daily increase of 0.34%. In the spot market, prices rose by 10-30 yuan/mt, but transactions in most markets were moderate during the day. On the news front, the People's Bank of China will intensify macroeconomic regulation and introduce a package of monetary policy measures, mainly comprising three categories and ten policies. From a supply perspective, the impact from maintenance on hot-rolled coil production this week was 151,800 mt, an increase of 65,500 mt WoW. Next week, the impact from maintenance is expected to be 215,800 mt, an increase of 64,000 mt WoW, indicating a slight easing of supply pressure. On the demand side, based on hot-rolled coil inventory data from multiple locations such as Shanghai, Lecong, Shenyang, and Ningbo after the holiday, varying degrees of accumulation were observed, but all remained at relatively low levels YoY. Inventory performance was better than the same period last year. In the short term, downstream demand is still supported, and the supply-demand imbalance is slowly accumulating. Overall, it is expected that the HRC price range will fluctuate rangebound, with the most-traded contract's fluctuation range expected to be between 3,190 and 3,250.

Rebar:

Yesterday, rebar futures moved downwards after a higher opening, closing at 3,098, up 0.19% from the previous trading day. In terms of spot prices, stimulated by favourable macroeconomic news, spot prices in some regions increased by 10-20 yuan/mt, with overall moderate transaction performance.

From a fundamental perspective, on the supply side, according to the SMM survey, due to poor profits at EAF steel mills and weakening demand, some electric furnaces in South China reduced their operating hours. Additionally, some electric furnaces in Central and South-west China underwent temporary maintenance due to raw material procurement issues. This week, the nationwide operating rate of electric furnaces declined to 36.52%, down 1.82% WoW. On the demand side, the demand for construction materials in May cooled down, and continuous rainfall during the flooding season in south China disrupted construction schedules. Overall, the supply-demand imbalance in the fundamentals is not yet prominent. Favourable macroeconomic news such as RRR cuts, reductions in housing provident fund loan interest rates, and progress in Sino-US trade talks still require time for implementation. Market sentiment remains cautious, and merchants are operating with prudence. It is expected that construction material prices may fluctuate in the short term, and subsequent attention should be paid to any changes in the macroeconomic direction.