[SMM Steel Morning Meeting Summary] The overall pullback in steel demand will limit the upside room for HRC prices

Domestic Ore:

The market price of domestic ore in Tangshan showed a slight upward trend. The dry-basis, tax-included delivery-to-factory price for ore with a 66% grade was 880-890 yuan/mt. Steel enterprises increased prices, iron ore futures remained high, and steel prices continued to rise, boosting the sentiment of producers. The sentiment of ore selectors and merchants with inventory improved, with some raising asking prices and others holding inventory and observing the market. Buyers faced increased resistance in inquiring and purchasing, remaining cautious about purchasing at high prices. High-price transactions in the market were hindered, with local supply and demand being relatively weak. Steel enterprises remained cautious about increasing prices. However, as local and surrounding resource prices rose, the cost center of raw materials for suppliers shifted upward. Additionally, the recent strong performance of the iron ore futures market was expected to drive up the price of local iron ore concentrates.

Imported Ore:

Yesterday, iron ore futures continued to surge, with the most-traded contract I2509 reaching a high of 769.5 and closing at 766.5, up 0.26% for the day. Traders sold according to market conditions. Steel mills adopted a cautious wait-and-see attitude, mostly conducting tenders and procurements on a need-based basis. The market transaction atmosphere was generally average. In the Shandong region, the mainstream transaction price of PB fines was around 748-750 yuan/mt, maintaining stability compared to the previous Friday. In the Tangshan region, the transaction price of PB fines was around 765 yuan/mt, also maintaining stability compared to the previous Friday. SMM shipping data showed that the total global iron ore shipments last week were 30.55 million mt, down 1.97 million mt MoM (a 6% decline). China's iron ore port arrivals were 24.69 million mt, down 1.62 million mt MoM (a 6% decline), indicating a short-term downward trend in supply. However, the General Administration of Customs announced today that June's imports reached a new high for the year, with a slightly narrowed YoY decline. The overall shipment volume in Q2 increased YoY, indicating that medium- and long-term supply pressures still exist. The current short-term market sentiment is relatively optimistic, and iron ore prices may continue to hold up well, but further upside room may be limited due to increased resistance above.

Coking Coal:

The quoted price of low-sulphur coking coal in Linfen is 1,210 yuan/mt. The quoted price of low-sulphur coking coal in Tangshan is 1,230 yuan/mt.
On the raw material fundamentals side, coal mines maintained stable production, and supply was temporarily stable. Downstream coking and steel enterprises actively purchased coking coal, with coal mine coking coal inventories declining to medium-low levels. Online auction market transactions performed well, with participants actively bidding, and the overall market trading atmosphere was good. There is still upside room for coking coal prices in the short term.

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, coking enterprises' losses expanded recently, with some voluntarily implementing production restrictions, leading to a tightening of coke supply. In terms of demand, the current production restriction notice in Shanxi has not yet been formalized, and steel mills' pig iron production remains at a relatively high level, with restocking needs. On the news front, mainstream steel mills in Hebei and Shandong intend to postpone the first round of coke price increases to this Friday (July 18th), accepting an increase of 50-55 yuan/mt. The previous coking enterprises' proposed increases of 70-75 yuan/mt and 90-95 yuan/mt are still under discussion. In summary, coking enterprises' shipment situations are good, coupled with strong cost-side support. The short-term coke market may hold up well, and a consensus has been reached on the first round of coke price increases.

Rebar:

Yesterday, the futures market oscillated, with a slight afternoon rally, closing at 3,138, up 0.16% from the previous trading day. On the spot side, most market quotes remained stable, with some markets experiencing covert price reductions for shipments, and overall price fluctuations were relatively small. In terms of transactions, performance slightly declined compared to the previous week, with just-in-time purchases being average.
From the fundamental perspective, in the short-process production, as spot prices rise, steel mills' profitability has slightly improved, but most are still operating at a loss. It is expected that the operating rate will remain at a moderately low level in the short term, with no significant increase. In the long-process production, most steel mills' profits are moderate, and their production enthusiasm remains high, with little change in overall supply. On the demand side, the current hot and rainy weather continues, limiting the progress of construction projects at construction sites. The actual demand for purchases is weak, and overall transactions rely more on sentiment-driven factors. Overall, in an environment of stable supply and weak demand, the weak reality may drag down the height of spot price increases. It is expected that prices will continue to be in the doldrums today.

HRC:

Yesterday, HRC futures and spot prices held up well, with the most-traded contract closing at 3276, up 0.09%. In the spot market, most markets across the country maintained stable quotes, with overall transaction performance being moderate. In terms of data, according to SMM shipping data, during this week, China's steel port departures from main ports reached 3.1363 million mt, up 28% WoW, indicating strong export performance.
Looking ahead, on the supply side, according to the latest tracking by SMM, the planned daily production of hot-rolled commodity materials for 39 mainstream steel mills producing HRC in July is 464,200 mt, a decrease of 2.72% compared to the actual daily average production of hot-rolled commodity materials in June. The planned daily average production of hot-rolled materials for domestic steel mills in July decreased MoM compared to the actual production in June. On the demand side, amid the off-season, with frequent hot and rainy weather, the overall demand for steel is under pressure. However, the downstream demand for HRC and steel exports are expected to maintain strong resilience. In addition, on the macro side, amid the dual policy "warm winds" of "anti-rat race competition" and the Political Bureau meeting, market sentiment has recovered. It is expected that HRC prices will hold up well in the short term. However, the overall pullback in steel demand during the off-season will limit the upside room for HRC prices.