[SMM Steel Morning Meeting Summary] Steel destocking continues, ferrous metals series sees slight recovery

Domestic Ore:

Iron ore concentrate prices in west Liaoning fluctuated in the doldrums, with 66-grade wet basis ex-factory prices (excluding tax) at 690-700 yuan/mt. Traders' risk aversion sentiment intensified, and inquiry activity was moderate. The mines and beneficiation plants recently faced tailings inspections, but the impact on local production was relatively small. Currently, buyers lack confidence in the future market, and steel mills are mainly purchasing based on rigid demand. Additionally, iron ore futures are in the doldrums, and the cost-effectiveness of domestic iron ore is showing a weakening trend. It is expected that local iron ore concentrate prices will continue to fluctuate in the doldrums in the short term.

Imported Ore:

Yesterday, rebar futures rebounded slightly, with the most-traded I2509 contract closing at 707, up 1.29% for the day. Traders were moderately active in selling; as the weekend approached, steel mills increased restocking. Market transaction atmosphere was moderate. In Shandong, mainstream transaction prices for PB fines were 735-740 yuan/mt, up 0-5 yuan/mt from the previous day. In Tangshan, PB fines transaction prices were around 750-755 yuan/mt, up 5 yuan/mt from the previous day.
Today, industry data showed some improvement, with a slight increase in rebar apparent demand. Total inventory continued to decline, boosting market sentiment. Coupled with potential tariff fluctuations, ore prices saw a slight rebound. However, the industry remains in a downward phase, and ongoing crude steel production cuts continue to limit upward pressure on ore prices. It is expected that iron ore prices will continue to fluctuate rangebound in the short term.

Coking Coal Market:
Low-sulphur coking coal in Linfen was quoted at 1,230 yuan/mt. Low-sulphur coking coal in Tangshan was quoted at 1,280 yuan/mt.
Fundamentally, coal mines maintained normal production rhythms, and supply remained loose. Downstream players still held a wait-and-see attitude, and online auction transactions were poor. Coal mines lowered starting bid prices, but signing conditions remained unfavorable. In summary, coking coal prices may continue to face downward pressure in the short term.
Coke Market:
The nationwide average price for first-grade metallurgical coke (dry quenched) was 1,570 yuan/mt. The nationwide average price for standard-grade metallurgical coke (dry quenched) was 1,430 yuan/mt. The nationwide average price for first-grade metallurgical coke (wet quenched) was 1,240 yuan/mt. The nationwide average price for standard-grade metallurgical coke (wet quenched) was 1,150 yuan/mt.
In terms of supply, most coke producers' profit and loss situation remained within an acceptable range, and production was temporarily stable, with coke supply fluctuating at highs. On the demand side, seasonal demand for steel decreased, and pig iron production continued to decline. Additionally, south China entered the rainy season, and high temperatures and heavy rainfall affected project starts, further dampening steel mills' purchasing enthusiasm. In summary, the market's bearish sentiment remains strong, and the coke market is expected to be in the doldrums in the short term, with a third round of price cuts anticipated next week.

Rebar:

Yesterday, rebar futures fluctuated upward, closing at 2,978, up 0.47% from the previous trading day. In terms of spot prices, morning quotes in various regions were stable. In the afternoon, rebar futures fluctuated higher, and some markets saw slight price increases of 10-20 yuan/mt, with overall transactions improving throughout the day.
On the fundamental side, supply-wise, production profits for construction materials diverged between BF and EAF steel mills. BF steel mills maintained relatively considerable profits and mostly operated normally, while EAF steel mills faced poor profitability and difficulties in collecting scrap, with most maintaining production during off-peak and mid-peak electricity periods. Demand-wise, market sentiment of wait-and-see loosened somewhat, with downstream procurement enthusiasm increasing. Meanwhile, end-users engaged in pre-holiday stockpiling. According to the SMM survey, the total inventory of rebar was 5.4782 million mt, down 3.66% WoW, indicating an accelerated pace of inventory destocking. Overall, the current inventory pressure on construction materials is relatively small, and downstream demand for pre-holiday stockpiling remains. Market transaction sentiment has rebounded, and it is expected that construction material prices will consolidate and hold up well in the short term.

Hot-rolled Coil (HRC)

Yesterday, the HRC futures market saw a slight increase, with a full-day gain of 0.32%, closing at 3110. Spot prices warmed up somewhat, rising by 10-30 yuan/mt. The futures market strengthened slightly, with moderate market confidence and transaction sentiment. HRC transactions were average. Supply-wise, the impact of maintenance at some steel mills in east and north China continued this week, leading to a slight decline in HRC production. Demand-wise, apparent demand cooled somewhat, with a significant narrowing in inventory drawdown. Social inventory across the country continued to decline. By region, the south and north-east China markets saw inventory buildup, while the east, central, and north China markets continued the destocking trend. In-plant inventory rose slightly WoW, amid seasonal weakening of downstream demand. Overall, it is expected that HRC prices will continue to fluctuate rangebound in the short term, with limited upside room.