This week, the ferrous metals series saw a strong rally, effectively breaking through the previous support level. At the beginning of the week, there was increased disruption in the raw material sector. First, the impact of environmental protection-driven production restrictions on coking coal weakened, leading to a decline in raw material prices. Subsequently, production restrictions were imposed on sinter in Tangshan. Although the actual impact was limited, it had a significant psychological effect, causing the ferrous metals series to rebound slightly. Mid-week, the Central Financial and Economic Affairs Commission meeting issued signals on addressing cut-throat competition, raising expectations for supply-side reforms. As a result, the ferrous metals series generally rose, becoming the main logic driving the market trend in the second half of the week. In the spot market, despite the strong performance of futures, end-users continued to purchase as needed. However, the spot-futures price spread narrowed, and there was an increase in demand for closing out reverse arbitrage positions and entering into forward arbitrage positions...

Today, HRC futures fluctuated rangebound, with the most-traded contract closing at 3201, up 0.25% on a daily basis. In the spot market, spot prices were in the doldrums, and the market trading atmosphere weakened. The overall daily trading volume pulled back compared to yesterday, with end-user purchase willingness remaining low. On the news front, US President Trump stated plans to impose tariffs ranging from 60% to 70% and from 10% to 20% on different countries, with countries starting to pay these tariffs from August 1. From the HRC fundamentals perspective, the impact from maintenance on HRC continued to decline this week, with production increasing slightly by 2,900 mt MoM. The weekly production reached 3.3685 million mt, and the supply pressure of HRC gradually became prominent. On the demand side, order-taking for automobiles and home appliances slowed down, and the operating rate level declined. Considering the recent weak order-taking and trading in cold-rolled steel, the demand for structural steel weakened, and the impact of the off-season became further prominent. This week's significant rally in the futures market drove market trading willingness to a certain extent, but most of it was the release of speculative demand, with no significant improvement in actual demand. Downstream industries still focused on purchasing as needed. On the cost side, iron ore provided strong support, while coke was in the doldrums. The support from furnace charge was moderate in the short term. Overall, HRC inventory continued to accumulate this week, with the accumulation range gradually expanding. The pattern of strong supply and weak demand has not changed for the time being. Looking ahead, there may be additional maintenance at steel mills in North China, and the supply pressure is expected to undergo a slight correction. Currently, the market has strong expectations for the July Central Political Bureau meeting. It is necessary to be vigilant about the risk of futures market pullback after sentiment digestion. It is expected that the fluctuation range of the most-traded HRC futures contract next week will be between 3150-3270.

[SMM Daily Briefing on Coal and Coke] In terms of supply, affected by profit losses and environmental protection inspections, coke producers' production has been restricted. Some coke producers still maintain a certain degree of production restrictions. However, the purchase volume from downstream buyers has increased, and coke inventories at coke producers have continued to decline. Demand side, driven by the strength of the futures market and the rise in steel prices, steel mills' profitability has improved. Pig iron production from blast furnaces has remained high, and the demand for coke procurement has continued to be released. In summary, the fundamentals of coke are gradually improving, with stable cost support. In the short term, coke prices may remain stable, with a certain expectation of a price increase.

[SMM Coke and Coking Coal Inventory: Coke inventory at coking plants continued to decline this week] This week, coke inventory at coking plants was 401,000 mt, down 28,000 mt MoM, or -6.5%. Coke inventory at steel mills was 2.478 million mt, down 1,000 mt MoM, or -0.0%. Coke inventory at ports was 1.17 million mt, down 80,000 mt MoM, or -6.4%. Coking coal inventory at coking plants was 2.407 million mt, up 49,000 mt MoM, or +2.1%.

The central bank announced that on July 3, 2025, the People's Bank of China conducted reverse repo operations worth 57.2 billion yuan through fixed-rate and quantity-based tenders, with an operating interest rate of 1.40%. Both the bid volume and the awarded volume were 57.2 billion yuan. According to data from Tonghuashun iFinD, reverse repo operations worth 509.3 billion yuan with a 7-day maturity were due today.

[SMM Steel Morning Meeting Summary: Supply Tightening Expectations Persist, HRC Prices Hold Up Well] Yesterday, HRC futures initially declined before rebounding, with the most-traded contract closing at 3,208, marking a daily increase of 1.45%. In the spot market, spot prices stabilized and edged up, with trading volumes increasing, though some transactions were driven by calendar spread strategies, and no significant increase in end-use demand was observed. In terms of supply, this week's HRC production increased by 2,900 mt MoM, with weekly production reaching 3.3685 million mt, indicating that the supply pressure for HRC remains relatively high. On the demand side, end-use demand from the manufacturing sector remains relatively resilient, but seasonal decline trends have also emerged. On the cost side, according to the SMM survey, under the influence of production control policies, pig iron production decreased by 4,200 mt this week, but still remained at a high level, and the support from furnace charge is unlikely to collapse in the short term. Looking ahead, with the current increase in HRC supply pressure and continuous accumulation of total inventory, but absolute contradictions remaining relatively small, the market still expects relief from the July Central Political Bureau Meeting and supply-demand structural pressures. Coupled with moderate cost support, it is anticipated that the most-traded HRC futures contract will continue to consolidate at a high level in the short term.

Today, HRC futures initially declined and then rebounded, with the most-traded contract closing at 3208, marking a daily increase of 1.45%. In the spot market, spot prices stabilized and showed signs of upward movement, with trading volume increasing. However, some of the activity was attributed to calendar spread arbitrageurs entering the market, and there was no significant increase in end-use demand. In terms of supply, this week's HRC production increased by 2,900 mt MoM, with weekly production reaching 3.3685 million mt. The supply pressure for HRC remains relatively high. On the demand side, terminal demand in the manufacturing sector remains relatively resilient, but seasonal decline trends have also emerged. On the cost side, according to the SMM survey, under the influence of production control policies, pig iron production decreased by 4,200 mt this week, but it still remains at a high level. The support from furnace charge is unlikely to collapse in the short term. Looking ahead, the current supply pressure for HRC is intensifying, and total inventory continues to accumulate, but the absolute contradiction remains relatively small. The market still expects relief from the pressure on the supply-demand structure at the July Central Political Bureau meeting, coupled with moderate cost support. It is anticipated that the most-traded HRC futures contract will continue to consolidate at a high level in the short term.

Overall, although this is the first time that Thailand has initiated an anti-circumvention investigation against cold-rolled steel from China, in fact, it initiated an anti-dumping investigation against cold-rolled steel products from China as early as August 2012, followed by a final determination in a sunset review, and on January 23, 2025, it filed another sunset review case. Based on the timeline, a final determination in the review may be made in early 2026. Considering that the anti-dumping measures have been in place for many years and cover a wider range of products, the actual impact of anti-dumping on the products involved has already been reflected in previous years. However, due to claims by Thai domestic producers, such as Thai Cold Rolled Steel Sheet Public Company Limited, that Chinese exporters are circumventing anti-dumping duties, Thailand has once again initiated an anti-circumvention investigation against China. According to data from the General Administration of Customs, the total volume of the products involved exported from China to Thailand in the first five months of 2025 was 16,300 mt, accounting for 9.39% of China's total export volume of the products involved, indicating a relatively significant overall impact. In extreme cases, this may lead to a decrease of 81,500 mt in China's total export volume in 2026...

[SMM Daily Briefing on Coal and Coke] In terms of supply, most coke enterprises are experiencing minor losses, but the impact on production is relatively small. Coke supply remains relatively stable, and the shipment situation of coke enterprises is moderate, with their own coke inventory continuing to decline. Demand side, pig iron production at steel mills remains high, creating a rigid demand for coke. Some steel mills with low inventory are still engaging in restocking. In summary, the fundamental contradictions in the coke market are not obvious, and cost support is solid. The short-term coke market may operate temporarily in a stable manner. However, due to the continuous and significant rally in the futures market, a rebound may occur subsequently.

The China Federation of Logistics and Purchasing (CFLP) released the Prosperity Index of China's Logistics Industry for June on the 2nd. As demand continues to improve, logistics business volume maintains expansion, and the prosperity level further increases. The Prosperity Index of China's Logistics Industry for June stood at 50.8%, up 0.2 percentage points MoM.