[SMM Steel Morning Meeting Summary] Supply-demand imbalance gradually accumulates, and the in-the-doldrums market may become the main trend in the short term

Domestic Ore:

In the Tangshan region, the market price of iron ore concentrates remained relatively stable. Mines and beneficiation plants showed a strong reluctance to budge on prices. Recently, environmental supervision and mine safety inspections in the local area have disrupted the operation of some beneficiation plants. Despite the pressure of losses in beneficiation, the number of shutdowns and maintenance operations was already high, so the actual impact on beneficiation production was limited. Overall, the production of iron ore concentrates in the local area remained tight. On the demand side, most local steel mills operated normally as planned, with a few steel mills formulating annual maintenance plans. However, the cost-effectiveness of domestically produced iron ore concentrates was currently weak, so steel mills mainly purchased on a need-to basis. Overall, it is expected that the price of local iron ore concentrates will fluctuate in the doldrums in the short term.

Imported Ore:

Yesterday, iron ore futures prices fell back from highs, with the most-traded contract I2509 closing at 699, down 0.07% for the day. Traders sold goods according to market conditions, while steel mills adopted a wait-and-see attitude and purchased as needed. The market trading atmosphere was generally lackluster. In the Shandong region, the mainstream transaction price of PB fines was around 715 yuan/mt, down 5 yuan/mt from the previous trading day. In the Tangshan region, the transaction price of PB fines was around 730 yuan/mt, also down 5 yuan/mt from the previous trading day. According to SMM's weekly data on the impact of blast furnace maintenance, the impact of blast furnace maintenance on pig iron production this week was 1.1184 million mt, a decrease of 14,500 mt WoW. Pig iron production this week may stabilize after falling. This provides some support for ore prices in the short term. However, it is also necessary to be vigilant about the expectation of negative feedback triggered by high production during the off-season. In the short term, it is difficult to change the stalemate in ore prices, which are expected to fluctuate rangebound.

Coking Coal:

The quoted price of low-sulphur coking coal in Linfen was 1,180 yuan/mt. The quoted price of low-sulphur coking coal in Tangshan was 1,200 yuan/mt.
Regarding the fundamentals of raw materials, June is Safety Production Month, and the market is still in a downward phase. The production enthusiasm of most coal mines has declined, leading to a slight tightening of coking coal supply. However, coal mine inventories remain high and are difficult to digest in the short term. Downstream purchases are mainly on a need-to basis, and the overall trading atmosphere is sluggish. Prices of some coal types may continue to decline this week.

Coke:

The nationwide average price of premium metallurgical coke (dry quenching) was 1,495 yuan/mt. The nationwide average price of quasi-premium metallurgical coke (dry quenching) was 1,355 yuan/mt. The nationwide average price of premium metallurgical coke (wet quenching) was 1,170 yuan/mt. The nationwide average price of quasi-premium metallurgical coke (wet quenching) was 1,080 yuan/mt.
In terms of supply, affected by environmental protection and inventory accumulation factors, some coking enterprises have slightly cut production, leading to a tightening of coke supply. On the demand side, steel mill profits are still moderate, and there have been no large-scale maintenance operations. There is a rigid demand for coke, but pig iron production has peaked, and steel mills have the intention to continue driving down coke prices. Some steel mills are controlling arrivals and lack the willingness to purchase. In summary, the market sentiment is bearish, and there is an expectation for a fourth round of price cuts for coke this week.

Rebar:

Yesterday, rebar futures prices fluctuated rangebound, closing at 2,981, up 0.17% from the previous trading day. In terms of spot prices, spot prices in most regions remained stable, with prices in a few regions falling by 10 yuan/mt. The market sentiment was one of wait-and-see, and overall trading performance was worse than the previous trading day. From a fundamental perspective, short-process steel mills have intensified losses, leading some steel mills to reduce operating hours or halt production. Long-process steel mill profits remain considerable. According to SMM's survey, the impact of construction material maintenance this week was 1.262 million mt, a decrease of 57,000 mt WoW, indicating a slight increase in supply. On the demand side, continuous heavy rainfall in the south and high temperatures in the north have limited the construction speed of downstream construction sites. Purchases are mainly on a need-to basis, and the overall market trading atmosphere is poor. In summary, contradictions in the fundamentals of construction materials are gradually emerging. With the impact of coking coal news fading, the support for rebar futures and spot prices is limited. It is expected that construction material prices will remain in the doldrums in the short term.

HRC:

Yesterday, HRC futures prices fluctuated rangebound, with the most-traded contract closing at 3,093, up 0.13% for the day. The trading atmosphere in the spot market was moderately weak. HRC quotations in mainstream cities fell by 10-30 yuan/mt compared to the previous day, and overall trading was generally poor. In terms of supply, the impact of hot-rolled maintenance this week was 67,600 mt, a decrease of 66,200 mt WoW. The impact of hot-rolled maintenance next week is expected to be 19,600 mt, a decrease of 48,000 mt compared to this week, indicating a continuous increase in HRC supply. In terms of inventory, according to SMM's inventory data for Zhangjiagang, Shenyang, and other places released during the day, inventory pressure in the east China region remains relatively small compared to north China, and inventory expectations are not expected to be too poor. On the demand side, the arrival of high temperatures and rainy weather, combined with the suspension of national subsidy policies for home appliances in many places, will also have a certain impact on short-term home appliance sales. There is still an expectation for seasonal weakening in HRC demand. In summary, under the pattern of strong supply and weak demand, it is expected that HRC prices will continue to fluctuate at lows.