[SMM HRC Daily Review] Macro environment remains weak, HRC prices expected to stabilize or weaken next week

This week, the futures market fluctuated rangebound and remained in the doldrums. Spot market prices pulled back by 20-30 yuan/mt compared to last Friday. Overall market transactions during the week were moderate, with most concentrated in the latter half of the week. In terms of supply, there were new maintenance impacts at some steel mills in north and east China this week, leading to a further decline in HRC production, which was already at a low level compared to the same period in previous years. On the demand side, downstream end-use demand remained resilient, and trade shipments were moderate. Social inventory in large samples continued to decline, with the rate of decline expanding. By region, the reduction in east and north China markets was greater than that in south and central China, as well as north-east China. Meanwhile, in-plant inventory also declined slightly on a WoW basis. Currently, SMM's total HRC inventory stands at 4.187 million mt, down 222,300 mt WoW. On the cost side, pig iron has entered a cycle of peaking and pulling back, but remains in high-level fluctuations in the short term, with cost support remaining intact for now. Looking ahead at the supply and demand fundamentals, the impact from maintenance has slightly decreased, but the recovery pace is slow, resulting in relatively small supply pressure in the short term. As the production pace of the manufacturing industry gradually slows down, there is an expectation of a gradual weakening in demand. In the short term, it is difficult to see significant upward driving forces from macro news. However, considering the certain restocking demand before the holiday, it is expected that HRC inventory will continue to decline, with the rate of decline narrowing. It is anticipated that HRC prices will remain in the doldrums next week, with a price range of 3,150-3,230 yuan/mt.