[SMM Steel Morning Meeting Summary] Seasonal demand in off-season, industrial contradictions gradually emerge

Domestic Ore:

The domestic ore market in western Liaoning is sluggish, with some miners refusing to budge on prices amid no inventory pressure. However, the current prices of iron ore concentrates remain relatively stable, with the ex-factory price (66% grade, wet basis, excluding tax) ranging from 680 to 690 yuan/mt. Traders lack confidence in the market outlook and are unwilling to purchase at high prices, leading to a clear stalemate and wait-and-see attitude from both sides. The characteristics of the off-season market persist, with steel mills controlling procurement volumes and still having a desire to drive down prices to secure profit margins. Overall, the futures market for iron ore has been in the doldrums recently, and it is expected that local iron ore concentrate prices will continue to be in the doldrums this week.

Imported Ore:

Last Friday, the iron ore futures market jumped initially and then pulled back, operating in the doldrums throughout the day. The most-traded contract I2509 eventually closed at 703, down 0.14% for the day. Traders' willingness to sell was moderate, with no speculative transactions for the time being. Steel mills adopted a cautious wait-and-see attitude, with their purchase willingness weakening. The market transaction atmosphere was average. The mainstream transaction prices of PB fines in the Shandong region were around 720-722 yuan/mt, basically stable compared to the previous trading day. In the Tangshan region, the transaction prices of PB fines were around 735-740 yuan/mt, also basically stable compared to the previous trading day.
As of June 13, SMM data showed that the total inventory at 35 ports was 137.22 million mt, an increase of 1.13 million mt from the previous week. The daily average port pick-up volume of imported ore was 2.909 million mt, a decrease of 107,000 mt compared to the previous week. Port arrivals increased MoM last week. However, the daily average pig iron production declined, weakening the demand for iron ore concentrates, and port cargo pick-up also showed a downward trend. Looking ahead to this week, the off-season effect is prominent, and steel consumption will further weaken. However, the current decline in pig iron production is relatively small, and the overall demand for iron ore remains high, providing relatively strong support for ore prices. In the short term, prices may continue to fluctuate rangebound.

Coking Coal:

The quoted price for low-sulphur coking coal in Linfen is 1,180 yuan/mt. In Tangshan, the quoted price for low-sulphur coking coal is 1,230 yuan/mt. Regarding the fundamentals of raw materials, some coal mines have suspended production due to accidents, leading to a tightening of coking coal supply. However, the market sentiment remains bearish, with downstream buyers cautiously purchasing. Online auction transaction prices have mainly fallen, and the coal mines' sales situation has not improved, with significant inventory pressure. This week, coking coal prices may continue to be under pressure.

Coke:

The nationwide average price for first-grade metallurgical coke (dry quenching) is 1,495 yuan/mt. The nationwide average price for quasi-first-grade metallurgical coke (dry quenching) is 1,355 yuan/mt. The nationwide average price for first-grade metallurgical coke (wet quenching) is 1,170 yuan/mt. The nationwide average price for quasi-first-grade metallurgical coke (wet quenching) is 1,080 yuan/mt.
In terms of supply, the national environmental protection inspection team has been stationed in provinces such as Shanxi and Inner Mongolia, with environmental protection checks becoming stricter. Some coke plants have implemented phased production cuts, and some have reduced production slightly due to losses and inventory accumulation, leading to a tightening of coke supply. In terms of demand, the off-season market has led to a decrease in finished steel demand, and steel mills' coke inventories are at a medium-to-high level, lacking restocking demand. Some steel mills with high coke inventories are even controlling arrivals. In terms of news, the US Department of Commerce announced that it will impose additional tariffs on various steel household appliances from June 23, including "steel derivatives" such as dishwashers, washing machines, and refrigerators. In summary, downstream demand is weakening, coke supply is relatively loose, and there is an expectation of weakening cost support. This week, there is an expectation of a fourth round of price reductions for coke.

Rebar:

Last week, rebar prices fluctuated rangebound, with the current nationwide average price at 3,087 yuan/mt, down 10 yuan/mt MoM. On the supply side, blast furnace steel mills are still in a profitable stage. In June, some steel mills adjusted their production structures, shifting to increase the production of high-quality special steel and strip steel varieties, with expectations of further reducing the production of construction materials. The prices of steel scrap have remained relatively firm, exacerbating production losses at EAF steel mills. This week, individual steel mills have suspended operations, and several others have reduced their operating hours, with operating rates significantly lower than the same period last year. In the short term, there are still plans for some producers to reduce operating hours or suspend production. On the demand side, the arrival of the plum rain season in south China has made it difficult for some downstream construction projects to operate, with overall transaction performance shrinking compared to the previous week. The plum rain season will continue until the end of June, and the impact of high temperatures in north China will make it difficult to reverse the weak demand trend during the traditional off-season. In terms of inventory, the decline in production accelerated last week, with in-plant and social inventories continuing to decrease. Apparent demand is in a seasonal decline phase. In the short term, the number of newly suspended or reduced production steel mills has decreased, and the decline in production may narrow, with the risk of in-plant inventory accumulation. Looking ahead, the domestic macro vacuum period, combined with overseas macro uncertainties, makes it difficult for news to significantly drive improvements in sentiment. The supply and demand fundamentals can temporarily maintain a weak balance, but with the official entry into the demand off-season, contradictions in the industry chain will gradually become prominent. Overall, spot prices are under pressure to rise. Among them, agents' spot inventory pressure is relatively small, with basic inverted sales slightly limiting the speed of bottom price declines.

HRC:

Last week, HRC prices initially rose and then fell, fluctuating rangebound within the interval. The market trading atmosphere improved somewhat, with weekly transactions being average. In terms of supply, the impact from maintenance on hot rolling decreased last week, leading to an increase in HRC supply. In terms of demand, key automakers issued statements committing to "payment terms not exceeding 60 days," reducing the account period risk in the automotive industry, accelerating trade payments, and increasing purchase willingness, leading to an increase in apparent demand. In terms of inventory, this week, SMM statistics show that the social inventory of HRC at 86 warehouses nationwide was 3.0577 million mt, down 12,300 mt MoM, or 0.4% MoM, with a slight decrease in nationwide social inventory. In terms of costs, last week, coke prices remained stable, and iron ore prices adjusted downward within a narrow range, with unstable cost support. Looking ahead, the impact from maintenance on hot rolling will further decrease, and supply will show an increasing trend. However, with the arrival of high-temperature and rainy weather, demand will seasonally weaken. Additionally, there is an expectation of coke price declines, and cost support will continue to weaken. This week, the most-traded HRC futures contract may operate in the doldrums within the 3,000-3,120 interval, and the expectation of HRC prices being in the doldrums remains unchanged.