September Peak Season Fails to Gain Momentum, Short-Term Steel Prices Remain in the Doldrums [SMM Steel Industry Chain Weekly Report]

Forecast for next week: September peak season slow to materialize, steel prices expected to remain in the doldrums

This week, the ferrous metals series showed a mixed performance. Ore prices started strong but weakened later, coking coal and coke prices fluctuated rangebound, rebar's most-traded contract trended with fluctuations, and HRC's most-traded contract remained in the doldrums.

On the news front, at the beginning of the week, the General Administration of Customs released data showing that China exported 9.51 million mt of steel in August 2025, down 326,000 mt or 3.3% MoM from the previous month; cumulative exports from January to August reached 77.49 million mt, up 10.0% YoY, still higher than the same period last year, indicating strong export resilience. Subsequently, market news reported that the Guinean government required developers such as Rio Tinto and Baowu to build processing and smelting facilities locally in Simandou, restricting mining companies from merely exporting iron ore to overseas plants, which was interpreted as positive for ore prices. In the latter part of the week, there were reports that China was considering guiding banks to provide loans to help local governments resolve trillions of yuan in enterprise arrears, leading to cautious market sentiment. In the spot market, with the end of production restrictions due to the parade, hot metal output rebounded this week, boosting ore prices. However, affected by heavy rainfall in multiple regions and sluggish downstream demand recovery, market transactions were weak, and steel inventory continued to increase this week.

Looking ahead to next week, with the US Fed interest rate cut period approaching, caution is advised as market sentiment may cool after expectations are met. On the raw material side, hot metal production is expected to continue rising, providing strong support for ore prices, while coke, due to weakening cost support, faces increased expectations for a second round of price cuts, suggesting a more divergent trend in the raw material sector. For steel, despite the September peak season, demand has been slow to pick up, with steel inventories continuing to accumulate, and rebar warrant volumes reaching record highs. Before a significant improvement in demand, steel prices will encounter resistance and may continue to operate in a weak range.

Iron ore: Supported by fundamentals and macro front, prices expected to maintain upward trend next week

This week, imported iron ore prices held up well. In the short term, with the end of environmental protection-driven production restrictions, blast furnaces at steel mills in north China resumed production quickly. According to SMM data, daily average hot metal production rose 44,000 mt MoM, boosting demand.

Looking ahead to next week, a fire in Brazil this week may cause minor disruptions to iron ore shipments, with Brazilian shipments expected to decline slightly. However, currently in the peak overseas shipping season, weather-related disruptions are limited, and rising ore prices have boosted miners' enthusiasm for shipping, so global shipments are still expected to increase slightly. Given that port arrivals were relatively high last week, this week's arrivals may pull back slightly, resulting in relatively small supply-side pressure. On the demand side, some steel mills still have plans to resume production, and hot metal production is expected to continue its slight rebound. Additionally, with some low-inventory ports gradually starting pre-holiday restocking, overall demand for iron ore is expected to continue to rise. In addition, the US Fed is expected to cut interest rates in September next week, and there are expectations for a more accommodative domestic monetary policy. Supported by both fundamentals and the macro front, iron ore prices are expected to continue their upward trend.

Coke: The market may be in the doldrums in the short term with a second round of price cuts expected

In terms of news, some steel mills in Tangshan and Tianjin have announced a second round of coke price cuts, with a reduction of 50-55 yuan/mt, effective at midnight on September 15, 2025. In terms of supply, coke profits are moderate, leading to increased production enthusiasm among coke enterprises, and coke production has steadily grown. However, the pace of coke shipments has slowed down, and sales pressure has increased. On the demand side, finished steel demand has underperformed, and finished steel prices have fluctuated downward, narrowing steel mill profits. Coupled with an increase in coke inventory at steel mills, some steel mills have slowed down their coke procurement pace. Regarding raw material fundamentals, previously suspended coal mines have resumed production smoothly, stabilizing coking coal supply. However, recent market conditions have weakened, and downstream and trading sectors show low purchasing interest, leading to a continuous deterioration in trading atmosphere. Some coal types at coal mines have seen inventory accumulation, and coking coal prices are expected to remain in the doldrums in the short term. In summary, the coke market is gradually shifting towards a more relaxed pattern, and with weakening cost support, the coke market may be in the doldrums in the short term, with a second round of price cuts expected.

Steel scrap: Tight resources and weak demand may lead to continued rangebound fluctuations in steel scrap prices in the short term

On the supply side, the tight resource situation in the steel scrap market remains unchanged. To cope with market volatility and capital turnover, most steel scrap processing enterprises generally adopt a "quick in, quick out" business strategy, showing low willingness to hold inventory. On the demand side, the steel market is weak, and steel mill profit margins are limited. Long-process steel mills, due to weak finished steel demand, have not been able to increase daily steel scrap consumption. Short-process steel mills are also performing poorly, and some electric furnace plants have reduced operating hours. According to the SMM survey, as of September 9, the operating rate of 50 major rebar-producing electric furnace steel mills nationwide was 39.72%, down 1.18% MoM. Overall, with weak downstream demand and poor steel mill performance, market sentiment is becoming cautious, and it is expected that steel scrap prices will continue to fluctuate rangebound next week.

Rebar: Weak industry fundamentals affect market sentiment; demand may see a temporary improvement next week

This week, rebar prices have fluctuated, with the current nationwide average price at 3,120.6 yuan/mt, down 10.6 yuan/mt MoM. On the supply side, long-process steel mills have seen shrinking profits, with some producers only marginally profitable, and no significant changes in production. Short-process steel mills are already incurring losses, and the ongoing difficulty in acquiring scrap continues to impact them. Some electric furnace plants have reduced operating hours, and short-term profitability is unlikely to improve significantly, with further downside room for the operating rate. On the demand side, there was rainy weather in central and southern China this week, which restricted the progress of downstream construction. The previous procurement situation was poor. Only on Friday, driven by the futures rally, trading volumes surged in some regions. Regarding inventory, there was a slight drawdown in producer's warehouses this week, but market inventories in many regions remained higher than the levels during the same period in previous years. Among them, Hangzhou's inventory buildup was particularly notable, reaching the level seen after winter stockpiling arrivals earlier in the year. On one hand, demand release in September fell short of expectations, and demand in August continued to be lower than the same period in previous years. On the other hand, some resources from southwestern China have gradually arrived, resulting in relatively significant pressure on social inventory. In the short term, it is necessary to monitor the inventory drawdown situation in east China. Looking ahead, the macro policy front continues to release positive signals. However, the weak industrial reality makes it difficult to significantly improve market sentiment, and spot price increases remain under pressure. Next week, as weather conditions improve in many regions, project construction may gradually resume normal procurement. If the pace of inventory buildup slows down, improved producer sentiment could stimulate upward momentum in spot prices. It is expected that spot prices for construction steel will maintain a fluctuating rangebound pattern next week, with the possibility of price rebounds driven by periodic surges in demand not ruled out.

HRC: Inventory Declines After Rising; Downside Room for HRC Prices Expected to Be Limited, with Rangebound Fluctuations as the Main Trend

This week, the HRC price range first declined and then rose, with an overall moderate-to-poor market trading atmosphere. After prices increased, sales at lower prices remained moderate, rising by 10-20 yuan/mt compared to last Friday. Recently, positive policy signals have been released: The central government plans to increase investment to alleviate local pressures and help resolve overdue payments to private enterprises, thereby stimulating enterprise vitality. Various ministries and commissions have emphasized steady growth. The State Council report proposed implementing more proactive fiscal policies, accelerating budget execution and policy implementation, ensuring efficient and safe use of funds, and maintaining sustained efforts in economic support policies. From a fundamental perspective, steel mills in southern and central China underwent maintenance this week, while some steel mills in northern China resumed production after maintenance. Coupled with increased production schedules at some steel mills, HRC production rose MoM. Downstream demand is slowly recovering, with order intake slightly improving. Further attention is needed regarding new order intake and operating rates. Regarding inventory, SMM statistics showed that the social inventory of HRC across 86 warehouses (a large sample) nationwide was 3.6407 million mt this week, down 29,400 mt or 0.8% WoW, and down 22.63% YoY. The national social inventory stopped rising and began to decline. By region, the largest declines were seen in northern and northeastern China, while other markets continued to experience inventory buildup, albeit at a significantly slower pace. On the macro front, next week marks the period for the US Fed interest rate cut. It is expected that, barring a deterioration in the policy environment, the downside room for HRC prices will remain limited, with the most-traded contract fluctuating within the 3,300-3,400 range.

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