[SMM Steel Morning Meeting Summary] Trading space for favourable macro front narrows, HRC lacks further upward momentum

Imported ore:

Traders sold according to market conditions, while steel mills purchased as needed. Trading volume in the market declined somewhat. The mainstream transaction prices of PB fines in Shandong were around 765-770 yuan/mt, with prices falling by 3-5 yuan/mt from the highs. In Tangshan, the transaction prices of PB fines were around 770-775 yuan/mt, with prices dropping by 5-10 yuan/mt. According to SMM's weekly blast furnace maintenance statistics, the impact of blast furnace maintenance on pig iron production this week was 900,900 mt, an increase of 80,700 mt WoW. It is estimated that the daily average pig iron production may decline by around 10,000 mt this week. Additionally, based on the blast furnace maintenance plans of steel mills, the impact of blast furnace maintenance is expected to increase next week, with a trend towards greater reduction in pig iron output, which is bearish for ore prices. However, considering the easing of market sentiment due to tariff impacts, prices may continue to hold up well in the short term, but the upside is limited.

Domestic ore:

At the beginning of the week, the Tangshan iron ore fines market was relatively stable, with the dry-basis, tax-inclusive delivery-to-factory prices for 66% grade ore at 940-945 yuan/mt. Influenced by the optimistic outcome of Sino-US tariff negotiations, market sentiment was relatively optimistic in the short term. Mines and beneficiation plants had a strong wait-and-see sentiment and a strong sentiment to stand firm on quotes. Steel mills' current inventory levels were relatively low, mostly at 5-7 days, indicating a certain expectation for restocking. Despite market rumors about potential crude steel production cuts, according to SMM's tracking, the likelihood of centralized production restrictions at steel mills in the short term remains low. Blast furnace pig iron production is still at a relatively high level, providing some support for demand for iron ore fines. Coupled with recent positive external news, it is expected that there may be an upside potential of 10-15 yuan for local iron ore concentrate prices in the short term.

Coking coal market:

On the fundamental side, coal mines maintained stable operations, continuing the loose supply situation. However, the pressure on coal mine shipments increased, leading to downward adjustments in quotes. Additionally, there have been more instances of unsold lots in recent times, gradually increasing the wait-and-see sentiment in the market. In the short term, there is still an expectation for price reductions in some high-inventory coal types.

Coke market:

In terms of supply, coking enterprises maintained high operating rates, with some experiencing slower shipments. However, overall inventory levels remained low, resulting in relatively small sales pressure. On the demand side, steel mills maintained high operating rates, with a demand for coke purchases. However, steel mills' coke inventory levels were generally at medium to high levels, resulting in a low willingness to restock. In summary, the imbalance in the coke market fundamentals increased slightly. Additionally, as the steel market is about to enter the traditional consumption off-season, there is a growing desire to drive down prices for raw materials. In the short term, the coke market may trend weaker.

Rebar:

On the supply side, according to SMM statistics, the impact of blast furnace maintenance on pig iron production this week was 900,900 mt, an increase of 80,700 mt from the impact of maintenance last week. On the demand side, as the traditional peak demand period has ended, the scope for demand growth is limited. Coupled with the onset of the rainy season in south China, which affects downstream construction progress, there is an expectation for further contraction in demand. Overall, the current Sino-US tariffs have not fallen to the previous low levels. The market expects that although tariffs will decline, they will remain at a relatively high level. The short-term improvement in sentiment cannot sustainably drive up steel prices. Therefore, it is expected that steel prices will fluctuate mainly.

HRC:

In the spot market, the intraday quotes fluctuated relatively small on a WoW basis, and market transactions were weaker than yesterday. According to SMM data, this week's HRC inventory in Shenyang was 104,300 mt, a decrease of 2,000 mt WoW, or a 1.88% decline. YoY, it decreased by 64,700 mt, or 38.28%. On the fundamental side, the daily average HRC production schedule in May declined slightly MoM from April, with supply pressure being lower than previously expected. In the short term, the Sino-US tariff war has temporarily come to an end, and the trading space for favourable macro front has narrowed. There is insufficient momentum for HRC prices to rise further. It is expected that the most-traded contract will fluctuate within the range of 3140-3280 in the short term. In the medium and long-term, off-season demand will gradually pull back. Without further macroeconomic stimulus, the price center of HRC will still move lower.