[SMM Steel Morning Meeting Summary] Inventory Increases Slightly After the Holiday, Building Materials Prices Fluctuate While Searching for Bottom

Imported Ore:

Yesterday, DCE iron ore futures fell sharply, with the most-traded contract I2509 closing at 693.5, down 2.73% for the day. Traders' enthusiasm for selling was moderate; steel mills purchased as needed, and the market transaction atmosphere was moderate. In Shandong, the mainstream transaction prices of PB fines were around 750-755 yuan/mt, down 5-10 yuan/mt from the previous day. In Tangshan, the transaction prices of PB fines were around 765-770 yuan/mt, down 5-10 yuan/mt from the previous day.

Yesterday, iron ore futures prices fell sharply, mainly due to the combined impact of three bearish factors: Firstly, the details of the crude steel production reduction policy were further clarified; Secondly, the apparent demand for the five major steel products dropped sharply on a WoW basis, triggering market concerns about "negative feedback"; Thirdly, the Trump administration sent a tough signal on tariff negotiations with China. However, with pig iron production currently at highs, the overall demand for iron ore remains good, providing some support for spot prices and leading to a widening of the spread between futures and spot prices. It is expected that iron ore prices will continue to fluctuate at highs in the doldrums in the short term.

Domestic Ore:

In the Tangshan region, the prices of iron ore concentrates remained relatively stable, with the dry-basis, tax-inclusive delivery-to-factory prices for 66% grade ore at 940-945 yuan/mt. The operation rate of local mines and beneficiation plants remained low, and overall production was at a low level. Steel mills mainly purchased as needed, with a strong desire to bargain down prices. Today, the market once again spread news about crude steel production reduction. With the weak performance of iron ore futures, steel mills may take the opportunity to bargain down purchasing prices. It is expected that the prices of local iron ore concentrates may drop back slightly in the short term.

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, coal mines are operating normally, and supply is relatively abundant. The purchasing pace of downstream buyers has slowed down, with reduced activity. Some coal mines have seen a slowdown in sales, leading to an accumulation of inventory. Prices of some coal types in the Linfen region have already begun to pull back slightly. In summary, market participants have a strong wait-and-see sentiment towards the subsequent coking coal market, and coking coal prices may remain in the doldrums in the short term.

 
Coke Market:

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

In terms of supply, most coking enterprises are maintaining profits and have good enthusiasm for operation, with coke production remaining at highs. Coke sales are also moderate, and inventory levels are maintained at lows. In terms of demand, steel mills' profitability remains moderate, and blast furnace pig iron production is fluctuating at highs, indicating good demand for coke. However, steel mills' coke inventory levels are at medium-to-high levels, and they mainly purchase as needed.Overall, the fundamental imbalance in the coke market is relatively small. However, the market outlook for finished steel products is relatively pessimistic. Additionally, the cost support for coke has weakened recently, and the upward momentum for price exploration is insufficient. The coke market may remain stable in the short term.

HRC:

Yesterday, the most-traded HRC futures contract fluctuated downward, closing at 3,191 at the end of the day, with a daily decline of 1.18%. In the spot market, prices fell by 10-30 yuan/mt. Trading activity was moderate to low in most markets, with overall trading remaining weak. On the news front, the US Fed concluded its two-day policy meeting, announcing that it would keep interest rates unchanged, maintaining the range at 4.25% to 4.50%. From a fundamental perspective, according to SMM's weekly balance data, HRC production fluctuated rangebound, with a slight decrease of 4,700 mt. In the first week after the holiday, inventory began to accumulate, increasing by 47,400 mt WoW, primarily due to significant increases in social inventory in east and south China. Apparent demand cooled significantly, with futures market expectations failing to materialize after the holiday. Downstream players lacked confidence in the market outlook, showing insufficient willingness to purchase. Traders faced increased pressure to sell, with daily trading volumes remaining poor amid seasonal demand weakness. Looking ahead, the supply pressure for HRC is expected to pull back, but demand is in the doldrums, and fundamental imbalances are building. It is anticipated that HRC prices will remain weak in the short term, with the most-traded contract expected to fluctuate within the range of 3,170-3,230.

Rebar:

Yesterday, rebar futures fluctuated downward, closing at 3,052, down 1.74% from the previous trading day. In terms of spot prices, as the futures market weakened, spot prices in most regions fell by 10-30 yuan/mt. Trading activity was mainly centered around lower-priced resources, with overall trading remaining average.

From a fundamental perspective, on the supply side, there is a divergence in production profits for construction materials between BF and EAF steel mills. BF steel mills have relatively favorable profits and are maintaining normal production levels. In contrast, EAF steel mills are facing poor profitability and difficulties in scrap collection, leading to instances of reduced operating hours and production halts at electric furnace plants. On the demand side, construction site operations were disrupted during the holiday, coupled with the onset of the rainy season in south China after the holiday, resulting in overall weak downstream demand. Additionally, considering that downstream construction sites had already engaged in stockpiling before the holiday, the pace of purchasing slowed during the holiday. After the holiday, there was a slight accumulation of construction material inventory, increasing inventory pressure. According to the SMM survey, the total rebar inventory was 6.1434 million mt, up 1.65% WoW. Overall, there is currently a slight accumulation of construction material inventory, with demand performance falling short of expectations. Market sentiment is cautious, and it is expected that construction material prices will maintain a weak and oscillating pattern in the short term.