[SMM Steel Morning Meeting Summary] Spot price of steel rises, with increased trading volume

Domestic ore:

In the western Liaoning region, iron ore concentrate prices remained relatively stable, with ex-factory prices (excluding tax, wet basis) for 66% grade iron ore concentrates ranging from 670 to 680 yuan/mt. Local inspections were relatively frequent, leading to a relatively tight supply of iron ore concentrates, which provided some support for local ore prices. On the demand side, steel mills were mainly purchasing as needed, and their desire to drive down prices remained strong. In the short term, the tug-of-war between sellers and buyers in the market was evident. However, considering the overall strong performance of iron ore futures in the afternoon yesterday, it is expected to drive up the prices of domestically produced iron ore concentrates slightly.

Imported ore:

Yesterday, the DCE iron ore futures market rebounded sharply in the afternoon, with the most-traded contract I2509 closing at 722.5, up 1.69% for the day. Traders were actively selling. Steel mills' wait-and-see sentiment intensified, and the number of inquiries decreased compared to before. The market trading atmosphere was average. In the Shandong region, the mainstream transaction prices for PB fines were around 710-715 yuan/mt, up 5-10 yuan/mt from before. In the Tangshan region, the transaction prices for PB fines were around 720-728 yuan/mt, also up 5-10 yuan/mt from before. According to the SMM survey, on July 2, the blast furnace operating rate of 242 steel mills surveyed by SMM was 87.54%, down 0.42 percentage points MoM. The daily average pig iron production of the sampled steel mills was 2.4137 million mt, down 0.42 million mt MoM. Although news of environmental protection-driven production restrictions had been circulating earlier, implementation was limited, and steel mills continued to maintain production amid high profits. Additionally, yesterday's market reaction to the signals released by the Central Financial and Economic Affairs Commission meeting on addressing cut-throat competition strengthened market expectations for the July Central Political Bureau meeting, potentially alleviating supply and demand structural pressures in stages. Market confidence has increased, and iron ore prices have risen along with the industry. It is expected that ore prices will maintain a relatively strong and volatile pattern in the short term. Pay attention to today's steel consumption and inventory data.

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 also 1,180 yuan/mt. Regarding the fundamentals of raw materials, environmental protection checks are still ongoing, but some coal mines that had accidents are now in the production resumption stage, with production recovering. Correspondingly, downstream purchasing enthusiasm has increased, and the trading sector has also started to purchase, leading to a decrease in coal mine coking coal inventory. In summary, coking coal prices have stabilized in the short term, and there is even an expectation of a rebound.

Coke:

The nationwide average price for first-grade metallurgical coke (dry quenching) is 1,440 yuan/mt. The nationwide average price for quasi-first-grade metallurgical coke (dry quenching) is 1,300 yuan/mt. The nationwide average price for first-grade metallurgical coke (wet quenching) is 1,120 yuan/mt. The nationwide average price for quasi-first-grade metallurgical coke (wet quenching) is 1,030 yuan/mt. In terms of supply, most coking enterprises are still operating at a loss, but excluding previous production cuts, production conditions have stabilized recently, and coke supply has not further decreased. At the same time, coking enterprises' sales conditions are moderate, and their own coke inventory continues to decline. In terms of supply, under the influence of production control policies, SMM pig iron output fell by 4,200 mt this week, but remained at a high level. There is still a rigid demand for coke, and some steel mills with low inventory are still restocking. In summary, the coke market has fewer fundamental contradictions, with stable cost support, and the coke market may remain stable in the short term.

Rebar:

Yesterday, the futures market fluctuated upward, closing at 3,065, up 2.61% from the previous trading day. In the spot market, most market quotes increased, with a range of 10-60 yuan/mt, driving a slight release of market speculative demand. However, rigid demand purchases remained weak, and overall trading performance was average. From the supply side, in the short-process sector, recently, some steel mills resumed production due to considerations of maintaining market share and safeguarding employee rights, while some steel mills added new shutdown and maintenance plans due to expanding losses. According to the SMM weekly survey, the operating rate of 50 electric furnace steel mills nationwide, which mainly produce construction steel, was 31.86%, up 0.48% from the previous period. In the long-process sector, most steel mills still had profits and maintained normal production rhythms, with overall supply remaining basically stable. From the demand side, in terms of news, the Central Financial and Economic Affairs Commission previously held a meeting to make arrangements for addressing cut-throat competition, driving the futures market upward and slightly improving market speculative demand. However, construction steel is currently still in the off-season for demand, with rigid demand transactions remaining limited. Subsequent attention should be paid to market sentiment, and caution should be exercised to prevent market sentiment from weakening, leading to a jump initially and then pull back in construction steel prices.

HRC:

Yesterday, HRC futures surged strongly, with the most-traded contract closing at 3,191, up 2.24% on a daily basis. In the spot market, spot prices increased by 10-40 yuan/mt, with trading volume picking up. In terms of supply, the impact from HRC maintenance this week was 19,600 mt, down 32,800 mt WoW. Next week, the impact from HRC maintenance is expected to be 2,800 mt, down 16,800 mt from this week. The impact from HRC maintenance has dropped to a minimum, further increasing the supply pressure of HRC. In terms of demand, the end-use demand of the manufacturing industry is relatively resilient, but seasonal decline trends have also emerged. In terms of costs, according to the SMM survey, under the influence of production control policies, SMM pig iron output fell by 4,200 mt this week, but remained at a high level. Furnace charge support is not easily collapsed in the short term. Looking ahead, the previous Central Financial and Economic Affairs Commission meeting released signals about addressing cut-throat competition, enhancing market expectations for the July Central Political Bureau meeting. The pressure on the supply-demand structure may be expected to ease in stages. In reality, the fundamental contradictions of HRC are not yet sharp, and with moderate cost support, it is expected that the most-traded HRC futures contract will still consolidate at a high level in the short term.