[SMM Steel Morning Meeting Summary] Ferrous metals series rise across the board, trading atmosphere improves

Domestic Ore:

Yesterday, the domestic ore market in Tangshan remained stable overall. Currently, the dry-basis, tax-inclusive delivery-to-factory price of Fe66% iron ore concentrates stands at 870-880 yuan/mt. Most traders are currently considering the ordering demand from steel mills, and their confidence in a price increase is not obvious. Buyers maintain a cautious attitude when inquiring and sourcing goods, unwilling to purchase at prices higher than their psychological expectations. Steel mills still primarily focus on purchasing as needed, and their overall desire to bargain down prices remains strong. However, the recent strong trend in the iron ore futures market suggests that there may be some upward potential for local iron ore concentrate prices.

Imported Ore:

Yesterday, DCE iron ore futures surged significantly, with the most-traded contract I2509 closing at 763.5, up 3.67% for the day. Traders showed a strong willingness to sell. Steel mills adopted a cautious wait-and-see attitude, with weak acceptance due to the rapid increase. The market transaction atmosphere was generally average. In the Shandong region, the mainstream transaction price of PB fines was around 745-750 yuan/mt, up 25-30 yuan/mt from the previous trading day. In the Tangshan region, the transaction price of PB fines was around 760-763 yuan/mt, up 20-25 yuan/mt from the previous trading day. From yesterday's industrial data, the apparent demand slightly decreased, which was in line with seasonal patterns. Inventory destocking was slightly higher than market expectations. End-use consumption remained stronger-than-usual during the off-season, with demand resilience exceeding expectations, providing strong support for prices. In addition, the "anti-cut-throat competition" campaign has raised market expectations for favorable policies at the important meeting in July. Under the combined effects, iron ore prices surged significantly. Considering that the recent rapid increase may accumulate risks of a correction, cautious operation is advised.

Coking Coal:

The quoted price of low-sulphur coking coal in Linfen is 1,180 yuan/mt. The quoted price of low-sulphur coking coal in Tangshan is 1,200 yuan/mt. Regarding the fundamentals of raw materials, some coal mines have resumed production, and the supply of coking coal has gradually improved. Along with the continuous surge in the futures market, market sentiment has been boosted. Downstream enterprises and traders have shown increased purchase willingness, with coal mines experiencing good sales. The inventory pressure of coking coal has eased, and online auctions have generally seen price increases. In the short term, coking coal prices are expected to rise slightly.

Coke:

The nationwide average price of first-grade metallurgical coke (dry quenching) is 1,440 yuan/mt. The nationwide average price of quasi-first-grade metallurgical coke (dry quenching) is 1,300 yuan/mt. The nationwide average price of first-grade metallurgical coke (wet quenching) is 1,120 yuan/mt. The nationwide average price of quasi-first-grade metallurgical coke (wet quenching) is 1,030 yuan/mt. In terms of supply, costs have increased recently, leading to an expansion in coking enterprises' losses, but they remain within an acceptable range. Production levels have remained stable for the time being. In addition, coking enterprises have experienced smooth sales, with some coking enterprises' coke inventory levels already dropping to low levels. In terms of demand, the finished steel market has shown resilience, coupled with good profitability of steel mills and pig iron production remaining at a high level, enhancing the willingness to purchase coke. In summary, the fundamentals of coke are performing well, and with coking coal prices stabilizing and rising, cost support has strengthened. The coke market is expected to operate steadily with a tendency to strengthen in the short term, with an expectation of a price increase in the next week.

Rebar:

Yesterday, rebar futures held up well, closing at 3123, up 1.89% from the previous trading day. In terms of spot prices, market prices rose slightly in the morning. In the afternoon, driven by favorable rumors, rebar futures fluctuated upward, and spot prices across regions followed suit, with daily price increases ranging from 10-50 yuan/mt. Trading volume was stronger than the previous trading day. From a fundamental perspective, on the supply side, profits continued to diverge between long-process and short-process steel mills. Blast furnace steel mills enjoyed considerable profits, maintaining moderate production enthusiasm. Some steel mills had good order-taking situations for specialty steel products, with stronger profit performance than rebar, leading to a slight shift of pig iron towards specialty steel products. Short-process steel mills faced poor profitability and difficulties in collecting scrap, with most electric furnace mills maintaining production during off-peak electricity hours. On the demand side, "Danas" continued to bring heavy rainfall to south China, while muggy weather "set in" in the north, affecting construction activities at many construction sites. The market remained in the traditional off-season for demand. However, today, driven by the upcoming Central Urban Work Conference and rumors of "restarting shanty town renovations," market trading sentiment warmed up. According to the SMM survey, this week's total rebar inventory stood at 5.0998 million mt, down 0.91% WoW. Inventories continued to decline, with overall inventory pressure remaining relatively small. In summary, the current contradiction between supply and demand fundamentals is not prominent. Short-term futures and spot prices are likely to fluctuate with the heat of news. It is expected that rebar prices may fluctuate at highs. Caution is advised against the risk of building material prices pulling back due to weakening market sentiment.

HRC:

Yesterday, HRC futures surged significantly, with the most-traded contract closing at 3262, a daily increase of 2.16%. In the spot market, spot prices rose by 30-60 yuan/mt along with the futures market. Trading sentiment throughout the day was moderately to strongly positive, with speculative demand continuously released and generally good trading across the national market. From the supply side, this week's HRC production increased slightly by 6,800 mt. Looking ahead, according to the SMM survey, in July, due to annual maintenance and rising order-taking pressure, some steel mills have reduced their production schedules, with daily average production decreasing by 13,000 mt, a decline of 2.72%, leading to a slight pullback in supply pressure. Meanwhile, according to the weekly balance data released during the day, social inventories declined this week, with futures holding up well. Traders' willingness to purchase increased, the pace of in-plant inventory transfers accelerated, and inventories declined slightly. Overall apparent demand warmed up. On the cost side, iron ore provided moderate support, while coke held up well with a slight rise expected next week. Furnace charge support remained strong. Due to recent market rumors and speculation driving significant increases in raw materials and finished products, although the fundamental contradictions in the HRC market are not acute, considering the deepening impact of the off-season for downstream demand, caution is advised against the risk of high steel prices pulling back after sentiment weakens. Overall, it is expected that the trend of the most-traded HRC contract will remain strong in the short term, with a fluctuation range of 3180-3300.