[SMM Steel Morning Meeting Summary] Raw material prices remain relatively strong, while demand in the off-season puts pressure on finished steel product prices

Domestic Ore:

At the beginning of the week, the domestic ore market in Tangshan remained stable overall. The local delivery-to-factory price for 66-grade dry-based ore, inclusive of tax, was 870-880 yuan/mt. Recently, some resources from Shandong have flowed to Hebei, improving the outflow of resources. Considering the recent rise in raw material prices, local concentrators have maintained firm asking prices due to high costs. With supply and demand in a stalemate, transactions have slowed down. Steel mills are currently focusing on purchasing as needed. However, the pig iron production of steel mill blast furnaces remains at a relatively high level, providing some support for the demand for iron ore concentrates. Additionally, the recent strong performance of iron ore futures has led to expectations that local iron ore concentrate prices will still have some room to rise.

Imported Ore:

Yesterday, the DCE iron ore futures opened low and closed high, maintaining a strong upward trend throughout the day. The most-traded contract I2509 eventually closed at 733, with a daily increase of 0.14%. Traders sold goods according to market conditions, and steel mills purchased as needed, resulting in a good market trading atmosphere. The mainstream transaction prices for PB fines in Shandong were around 723-724 yuan/mt, up 2-3 yuan/mt from the previous trading day. In Tangshan, the transaction prices for PB fines were around 733-735 yuan/mt, up 0-3 yuan/mt from the previous trading day. The market's pessimistic sentiment towards tariffs has eased somewhat. Despite recent rumors of production restrictions, the actual impact has been limited. SMM data shows that the impact from blast furnace maintenance this week only increased by 30,700 mt MoM to 1.1845 million mt, with a limited decline in pig iron production. Coupled with a significant contraction in iron ore supply in the short term, the weak supply-demand pattern has instead supported a rebound in ore prices. Subsequent attention should be paid to changes in finished steel demand and inventory accumulation during the off-season.

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 fundamentals of raw materials, some coal mines that had suspended production have resumed production, and there is an expectation of increased coking coal supply. There is also purchasing demand downstream, supporting firm coking coal prices. Some high-quality backbone coal varieties still have expectations for price increases. However, the profitability of downstream coking enterprises is poor. Before coke prices rise, there is limited room for short-term coking coal price increases.

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, coking enterprises are operating normally, and shipments are smooth. Downstream purchasing enthusiasm for coke has increased, and coke inventories at coking enterprises continue to decline. In terms of demand, due to the environmental protection-driven production restriction policy and regular blast furnace maintenance, pig iron production at steel mills has slightly decreased. However, steel mills have relatively high profitability, and there is limited room for pig iron production to decline. There is a rigid demand for coke in the short term. In summary, the fundamentals of coke remain moderate, with some coke enterprises showing reluctance to sell, suggesting that the coke market may hold up well with a slight rise in the short term.

Rebar:

Yesterday, the futures market fluctuated rangebound, closing at 3063, down 0.13% from the previous trading day. In the spot market, most market quotes dropped slightly in the morning, with declines of 10-20 yuan/mt. Trading sentiment improved slightly, and in the afternoon, rebar futures fluctuated rangebound, with spot prices rebounding slightly. The average daily price remained largely stable, and market transactions were average. From the supply side, for EAF steel mills, profit losses persisted, and most independent electric furnace plants maintained low operating hours. For blast furnace steel mills, according to the SMM weekly maintenance survey, multiple steel mills resumed production after rolling line maintenance, with the impact from maintenance on building materials reaching 1.2678 million mt, a decrease of 4,400 mt WoW, indicating a slight increase in supply. On the demand side, the "Danas" typhoon warning combined with continued high temperatures slowed construction progress at some sites, with terminal purchases primarily driven by immediate needs. Overall, supply pressures persist, and low demand expectations are expected to continue during the traditional consumption off-season. Agents are adopting low inventory strategies, and the market sentiment is characterized by a strong wait-and-see attitude. It is expected that short-term building material prices will be more likely to fall than rise.

HRC:

Yesterday, HRC futures were in the doldrums, with the most-traded contract closing at 3191, a daily decline of 0.06%. In the spot market, spot prices fluctuated by 10 yuan/mt, with regional differentiation in trading. Transactions in South China were relatively active, while those in East China, North China, and Northeast China were average. From a macro perspective, US President Trump signed an executive order extending the so-called "reciprocal tariff" moratorium, postponing the implementation date from July 9 to August 1. From the supply side, the impact from maintenance on hot-rolled production this week was 2,800 mt, a decrease of 16,800 mt WoW. Next week, the impact from maintenance on hot-rolled production is expected to be 39,900 mt, an increase of 37,100 mt WoW, with production fluctuating at a relatively high level. Meanwhile, according to the inventory data released today in Zhangjiagang and Shenyang, there were varying degrees of inventory reductions, indicating strong spot demand in the latter half of last week. After continuous price increases in the futures market last week, the most-traded contract has reached a relatively high level, and the resilience of terminal demand is gradually weakening. In the short term, market focus should still be on the impact of Trump's new tariff rates and domestic anti-cut-throat competition measures on market sentiment, as well as the impact on export sentiment after the recent announcement of anti-dumping measures. According to the SMM survey, export orders for HRC have weakened recently, and market activity is low. Overall, before the Political Bureau meeting at month-end, it is expected that the most-traded HRC futures contract will experience sideways movement, with a fluctuation range of 3150-3250.