[SMM Steel Morning Meeting Summary] High Temperature and Heavy Rainfall Coincide with Local High School Entrance Exams; Building Materials Market Enters "Off-Season Dormant Period"

Domestic Ore:

In Tangshan, the price of domestic iron ore concentrates dropped slightly. Currently, the dry-basis, tax-inclusive delivery-to-factory price for 66-grade ore is 880-890 yuan/mt. There were no significant inquiries for beneficiation or trading, with some buyers offering notably low prices. Beneficiation plants, facing significant pressure from losses, were reluctant to sell. There were no notable transactions for high-grade resources, and most of the market's shipments were steel mill orders. Both supply and demand for low-grade ore were notably weak. Recently, some local steel mills have been formulating annual maintenance plans, leading to weak overall demand for domestic iron ore concentrates. Additionally, the recent fluctuating trend in the iron ore futures market suggests that the local iron ore concentrate prices are expected to remain in the doldrums in the short term.

Imported Ore:

Yesterday, the DCE iron ore futures continued to drop slightly in the morning session but rebounded slightly in the afternoon. The most-traded I2509 contract eventually closed at 698, with a daily increase of 0.43%. Traders sold according to market conditions, with few speculative transactions. Steel mills remained cautious and had a strong desire to bargain down prices. The overall market transaction atmosphere was average. In the Shandong region, the mainstream transaction price for PB fines was around 710 yuan/mt, up 2-3 yuan/mt from the previous trading day. In the Tangshan region, the transaction price for PB fines was around 720 yuan/mt, basically stable compared to the previous trading day. From yesterday's industrial data, the apparent consumption of the five major steel products improved overall, with a significant MoM increase in plate and coil demand, while rebar only dropped back slightly due to factors such as heavy rain and the high school entrance examination. It is worth noting that despite the increase in total production, steel inventory continued to decline, supporting the prices of overall ferrous metals and causing iron ore prices to stop falling and stabilize. However, considering the characteristics of the industry's off-season and the pressure from high production, concerns about the "negative feedback" mechanism still persist in the market. It is expected that ore prices will lack sustained rebound momentum in the short term and may continue to fluctuate rangebound.

Coking Coal:

The quoted price for low-sulphur coking coal in Linfen is 1,180 yuan/mt. The quoted price for low-sulphur coking coal in Tangshan is 1,200 yuan/mt. Regarding the raw material fundamentals, coal mine safety production is prioritized, leading to some suppression in production. The market trading atmosphere is sluggish, with coking and steel enterprises maintaining cautious purchasing. Coal mines are experiencing poor sales, and online auction prices continue to decline, indicating that there is still an expectation for coking coal prices to drop.

Coke:

The nationwide average price for premium metallurgical coke (dry quenching) is 1,495 yuan/mt. The nationwide average price for quasi-premium metallurgical coke (dry quenching) is 1,355 yuan/mt. The nationwide average price for premium metallurgical coke (wet quenching) is 1,170 yuan/mt. The nationwide average price for quasi-premium metallurgical coke (wet quenching) is 1,080 yuan/mt. In terms of supply, affected by environmental protection factors, coking enterprises have reduced their operations, but downstream purchase willingness remains low, and most coking enterprises are still accumulating coke inventory. In terms of demand, steel mills' coke inventory is generally at a medium to high level, but the market is still in a downward phase, and steel mills' purchasing enthusiasm is weak. In summary, the overall supply-demand pattern for coke is loose, and the coke market is expected to remain in the doldrums in the short term, with the anticipation of a fourth round of price reduction proposals strengthening.

Rebar:

Yesterday, rebar futures first declined and then rebounded, closing at 2,986, up 0.13% from the previous trading day. In terms of spot prices, most construction material markets held their quotations steady in the morning, with a few markets experiencing slight declines of 10-30 yuan/mt. Trading volume was poor throughout the day. From a fundamental perspective, on the supply side, there is a divergence in production profits for construction materials between BF and EAF steel mills. BF steel mills enjoy relatively decent profits and are mostly operating normally, while EAF steel mills face poor profitability and difficulties in scrap collection, with most maintaining production during off-peak electricity hours. On the demand side, rainy weather in the south and high temperatures in the north persist, while the mid-term exams in some regions have affected construction site schedules, resulting in weak downstream procurement enthusiasm. According to the SMM survey, the total inventory of rebar stood at 5.1853 million mt, down 7.51% WoW, with the destocking pace slowing down. Specifically, in-plant inventory decreased by 0.80% WoW, while social inventory fell by 1.77% WoW. Overall, given the current off-season demand and the general market trading atmosphere, it is expected that construction material prices may consolidate in the short term.

HRC:

Yesterday, HRC futures prices continued to fluctuate rangebound, with the most-traded contract closing at 3,103, up 0.13% for the day. Trading sentiment in the spot market was average, with HRC quotations in major cities slightly down by 5-10 yuan/mt from the previous trading day, and overall trading volume remaining weak throughout the day. On the news front, the US Fed's latest interest rate decision maintained the target range for the federal funds rate at 4.25%-4.5%, in line with market expectations. This marks the fourth consecutive month that the US Fed has kept the rate unchanged. According to the SMM weekly balance data released during the day, HRC production fluctuated rangebound this week, currently at 3.3364 million mt, up 8,300 mt WoW. Apparent demand showed moderate performance, continuing to recover, but mainly supported by downstream manufacturing demand. The seasonal impact on the infrastructure sector is deepening, with demand continuing to weaken. Inventory performance aligns with previous forecasts, with social inventory continuing its destocking trend and the rate of decline expanding. By region, except for slight inventory buildup in central and north-east China, inventories in east, south, and north China are all decreasing. Steel mills' shipping pace has also accelerated, with in-plant inventory shifting from increase to decrease. The current total inventory for the large SMM sample stands at 403.98, down 121,400 mt WoW. In the short term, there is no significant risk of cost collapse, providing moderate support. Overall, it is expected that the most-traded HRC contract will continue to fluctuate rangebound mainly within the 3,000-3,140 interval.