[SMM Steel Morning Meeting Summary] Supply pressure eases, coupled with moderate demand resilience; HRC prices still have a slight upward potential

Imported ore:

Traders are selling according to market conditions. Some steel mills are experiencing poor sales of finished products, leading to weakened purchase willingness. The market transaction atmosphere is average. The mainstream transaction price of PB fines in Shandong is around 775 yuan/mt, with prices holding steady. In Tangshan, the transaction price of PB fines is around 785-790 yuan/mt, also holding steady. Industrial data has shown significant improvement on a WoW basis, with apparent demand for the five major steel products rebounding sharply, and in-plant and social inventories declining simultaneously. The industrial supply and demand situation is healthy. However, macro sentiment has been fully released, and market sentiment is relatively cautious, with futures and spot prices holding steady. Considering the healthy fundamentals of iron ore itself, high pig iron production, and limited overseas supply pressure, prices are expected to continue to hold up well in the short term.

Domestic ore:

In the Tangshan region, the price of iron ore concentrates has slightly increased by 5-10 yuan. The dry-basis, tax-inclusive delivery-to-factory price of Fe66% iron ore concentrates is 945-950 yuan/mt. Currently, mines and beneficiation plants have a strong sentiment to stand firm on quotes, with a relatively strong bullish sentiment in the short term, and they are not in a hurry to sell. According to SMM tracking, steel mills' blast furnaces have not undergone maintenance operations recently, and pig iron production remains at a relatively high level, providing certain support for local iron ore powder demand. Local steel mill profits are moderate, and it is expected that there will be no production restriction operations in the short term. Coupled with the continued tightness of local iron ore concentrate resources, it is expected that there will still be some room for price increases in the short term.

Coking coal market:

In terms of fundamentals, coal mines are operating normally, and coking coal supply has increased. Some steel mills have reduced coke prices, leading to a weak sentiment in the coal and coke market. Coking coal spot transactions are average, with online auction failures still occurring. Coal mine inventories have slightly accumulated, and coking coal prices may continue to face downward pressure.

Coke market:

In terms of supply, the reduction in coking coal prices has led to profit recovery, and coking enterprises are maintaining high production enthusiasm, with supply remaining at a high and stable level. In addition, coking enterprises are actively selling, and their own coke inventories remain at a low level. In terms of demand, steel mills have good profitability, and blast furnace operation rates remain high, maintaining rigid demand for coke. However, steel mills' coke inventories are generally high, coupled with increased expectations of raw material price reductions, and steel mills are adopting a cautious procurement strategy. In summary, market expectations have turned pessimistic, and it is expected that the coke market may be in the doldrums in the short term.

Rebar:

Currently, the fundamentals of rebar have improved in stages. As the southern region enters the hot and rainy season, the construction progress of engineering projects is hindered. Although the north is in the peak construction season, new demand is limited. This week, the total rebar inventory is 5.8283 million mt, down 5.13% WoW, with both in-plant and social inventories of rebar declining. Overall, although Sino-US relations have improved somewhat, there is still significant uncertainty in the later stage, posing a great test to the resilience of downstream demand. It is expected that steel prices will mainly oscillate in the short term.

HRC:

In the spot market, most daily quotes remained stable, with overall transaction performance being moderate. SMM released its weekly HRC supply and demand data. This week, maintenance at some steel mills in east China, north China, and parts of south China was relatively concentrated. Coupled with a MoM decline in the daily average production schedule of domestic steel mills' hot-rolled coil in May, HRC production pulled back significantly on a MoM basis. This week, SMM's statistics showed that the social inventory of HRC in 86 warehouses (large sample) nationwide was 3.3304 million mt, a MoM decrease of 106,100 mt, or -3.09% MoM and -18.45% YoY compared to the Gregorian calendar year. This week, the nationwide social inventory declined. By region, the central China market began to experience a slight inventory buildup, while only the east China market saw a relatively larger decline, with inventories in other regions decreasing slightly. In the short term, with the easing of supply pressure and moderate demand resilience, inventory continues to deplete and remains at a relatively low level compared to the same period in previous years. The fundamental imbalance in the HRC market is not pronounced, providing support for the price floor. Considering that the reduction in tariffs has boosted market sentiment to a certain extent, it is expected that HRC prices will still have a slight upward space in the short term.