[SMM Steel Morning Meeting Summary] Consensus Reached in China-U.S. Tariff Negotiations, HRC Prices Driven Up by Positive News in the Short Term

Imported ore:

Traders showed good enthusiasm for shipping, with a slight increase in speculative transactions. Steel mills adopted a cautious wait-and-see attitude, purchasing as needed. The market transaction atmosphere was average. The mainstream transaction prices of PB fines in Shandong were around 765-773 yuan/mt, up 15-18 yuan/mt. The transaction prices of PB fines in Tangshan were around 780-785 yuan/mt, up 20 yuan/mt. Last week, SMM's total global iron ore shipments were 31.62 million mt, down 740,000 mt WoW, a slight decrease of 2.3%. Among them, Australia's shipments were 17.46 million mt, down slightly by 8.3% WoW. Brazil's shipments were 7.75 million mt, up slightly by 13.2% WoW. Shipments from non-mainstream mines were 6.42 million mt, up slightly by 11.6% WoW. SMM's total iron ore arrivals in China were 26.81 million mt, up 1.51 million mt WoW, an increase of 5.96%. There was a slight YoY increase of 14%. The supply pressure on iron ore was relatively small, and inventories may continue to decline slightly. In addition, the outcome of the Sino-US tariff negotiations exceeded expectations, boosting market sentiment and driving ore prices up significantly. In the later stage, focus will be on the crude steel production reduction policy and the accumulation of major steel inventories.

Domestic ore:

This week, the price of 64-grade alkaline fines (dry basis, pre-tax) from enterprises in Shandong increased by 3 yuan to 844 yuan. Most miners were operating normally, but many reported poor shipping conditions. Some miners' inventories had accumulated to 10,000-20,000 mt, creating certain shipping pressure. Steel enterprises were operating with low inventories, maintaining 3-5 days' worth of stock. Due to the relatively high cost-effectiveness of imported ore, their willingness to purchase domestic fines was average. Overall market transactions were sluggish. The Sino-US tariff negotiations proceeded smoothly, with significant reductions in mutual tariffs. The market's overall reaction was strong, and market confidence increased, which may drive market transactions. It is expected that iron ore prices may rise slightly in the short term.

Coking coal market:

On the fundamental side, coal mines maintained normal production, but sales were weak, and inventories began to accumulate. However, the outcome of the Sino-US tariff negotiations exceeded market expectations, which was positive for commodity prices. Therefore, it is expected that coking coal prices may remain in the doldrums this week.

Coke market:

In terms of supply, most enterprises maintained profits or operated at the break-even point, and their coke inventories remained low. There was little willingness to cut production voluntarily, so coke supply was relatively sufficient in the short term. On the demand side, the outcome of the Sino-US tariff negotiations exceeded market expectations, stimulating downstream end-use demand. Steel mills' profitability was moderate, and blast furnace pig iron production was at a high level, creating rigid demand for coke. Steel mills' purchase enthusiasm increased. In summary, the fundamental imbalance in the coke market was relatively small, and market confidence was high. The coke market may remain stable this week, with expectations of price reductions dissipating.

HRC:

In the spot market, the rise in futures prices improved market sentiment, with improvements in low-price transactions and speculative demand. However, spot price increases in some markets were sluggish.On the news front, the China-US Geneva Economic and Trade Talks concluded with a joint statement. China and the US agreed to reduce tariffs over the next 90 days, marking substantial progress in the high-level economic and trade talks between the two countries. The significant reduction in bilateral tariff levels has significantly boosted market sentiment. On the fundamental front, as May approaches, downstream demand will be impacted to some extent by the off-season. It is expected that the apparent demand for HRC will pull back on a MoM basis in May. In terms of supply, the daily average production schedule for HRC in May will slightly decrease compared to April, slightly better than previously expected. Additionally, with the consensus reached in the China-US tariff negotiations, the short-term HRC price is expected to be driven by positive news and is likely to break through slightly upwards. In the medium and long-term, with the confirmed decline in off-season demand and the fading impact of tariff benefits, if there is a lack of further favourable macro front stimulus, the price center of HRC will still trend downwards.

Rebar:

With the significant reduction in China-US tariffs and the formal advancement of trade negotiations, market sentiment has improved, leading to an increase in speculative demand. Spot prices have risen to varying degrees across regions, with trading conditions being favorable. Currently, the blast furnace operating rate remains at a high level, with overall supply at a peak. Subsequently, with the onset of the rainy season in south China, new starts in real estate will continue to decline, and the growth rate of infrastructure investment will also slow down, potentially suppressing some demand for construction materials. There are signs that pig iron production may have peaked and is pulling back. Overall, despite the increase in futures prices, it is more influenced by short-term market sentiment or capital factors. From a fundamental perspective, the market still faces certain pressures, and prices are expected to fluctuate rangebound.