This week, the ferrous metals series fluctuated rangebound, with iron ore continuing to outperform other ferrous metals, while coke showed weaker performance. On the macro front, China's National Bureau of Statistics released macro data for the period from January to April, revealing that real estate data remained sluggish, with significant YoY declines in steel-related investments and new construction starts. Overseas, the US composite PMI and manufacturing PMI indices both rebounded. Driven by concerns over future supply deficits, manufacturing enterprises continued to stockpile goods in May. In the spot market, futures fluctuations were relatively narrow this week, and market sentiment remained lukewarm. Meanwhile, affected by high temperatures and rainy weather, demand in the construction materials market weakened...

This week, the futures market fluctuated rangebound and remained in the doldrums. Spot market prices fell 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 is already at a low level compared to the same period in previous years. On the demand side, downstream end-use demand remains resilient, and trade shipments are 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 it remains fluctuating at highs in the short term, with cost support remaining intact. Looking ahead at the supply and demand fundamentals, the impact from maintenance is expected to slightly decrease, 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, demand is expected to gradually weaken. It is difficult to see significant upward driving forces from macro news in the short term. 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 expected that HRC prices will be in the doldrums next week, with a price range of 3,150-3,230 yuan/mt.

[SMM Daily Briefing on Coking Coal and Coke] In terms of supply, coal mines continue to offer concessions to restore the profitability of coking enterprises. Most coking enterprises are operating steadily, but their shipments are somewhat hindered, leading to a slight accumulation of their own coke inventory. Overall, the supply of coke remains relatively loose. On the demand side, the coke inventory of most steel mills is currently at a medium-to-high level. Moreover, pig iron production has jumped initially and then pulled back, resulting in a decrease in the immediate demand of steel mills. Consequently, their enthusiasm for coke procurement has diminished, and their desire to bargain down coke prices has increased. In summary, the supply-demand imbalance of coke continues to accumulate, and cost support has weakened. It is expected that there will be a second round of price reductions for coke next week.

[SMM Coke and Coking Coal Inventory: Coke inventory at coking plants this week was 348,000 mt] Coke inventory at coking plants this week was 348,000 mt, up 39,000 mt or 12.6% WoW. Coke inventory at steel mills was 2.636 million mt, down 39,000 mt or 1.5% WoW. Coke inventory at ports was 1.47 million mt, down 10,000 mt or 0.7% WoW. Coking coal inventory at coking plants was 2.576 million mt, down 52,000 mt or 2.0% WoW.

Today, the most-traded HRC futures first rose and then fell, closing at 3210, up 0.09%. In the spot market, intraday quotes remained stable, with an overall improvement in trading performance. In terms of supply, this week's HRC production was 3.2452 million mt, down 14,200 mt WoW. The short-term supply pressure remained low, with a slight decrease in the impact from subsequent maintenance, but the recovery pace was slow. In terms of demand, end-use demand remained resilient in the short term, and the inventory in major cities continued to decline. This week, the total SMM HRC inventory was 4.187 million mt, down 222,300 mt WoW. On the cost side, pig iron production is expected to decrease but will fluctuate at highs, with cost support remaining firm for now. In summary, HRC will continue to be in a de-stocking phase in the short term, but the upward driving force is still insufficient. The most-traded HRC futures contract may fluctuate rangebound at the current level in the short term, and the strategy of shorting on rallies remains unchanged.

[SMM Daily Coke Market Briefing] In terms of supply, coal mines continue to offer concessions to restore coke producers' profits. Most coke producers are maintaining stable production, but shipments are facing certain obstacles, leading to a slight accumulation of their own coke inventory and an increase in sales pressure. On the demand side, despite moderate steel mill profits, most steel mills currently have medium-to-high coke inventory levels, resulting in low enthusiasm for coke procurement. Instead, their desire to bargain down coke prices is gradually increasing. In summary, the supply-demand imbalance in the coke market has slightly accumulated, and cost support has weakened. Consequently, coke prices may continue to face downward pressure, with expectations for a second round of price reductions.

In summary, influenced by the low arrivals from mainstream steel mills, the supply pressure in Lecong will remain low in the short term. Meanwhile, demand still shows resilience in the short term, and the off-season effect is not significant. Therefore, SMM predicts that under the pattern of weak supply and stable demand, Lecong's HRC inventory will continue to decline, and spot prices will remain relatively firm. 

[SMM Analysis] As the off-season approaches, will the inventory drawdown in Lecong continue? Overall, due to the low arrival volumes from mainstream steel mills, the supply pressure in Lecong will remain low in the subsequent period. Meanwhile, demand remains resilient in the short term, and the off-season effect is not yet apparent. Therefore, SMM predicts that under the pattern of weak supply and stable demand, the inventory drawdown of HRC in Lecong will continue, and the spot price will remain relatively firm...