Fundamentals of Finished Products Suppress Market Performance, Ferrous Metals Series Struggle to Rebound in the Short Term [SMM Steel Industry Chain Weekly Report]

Forecast for Next Week: Finished Steel Fundamentals Curb Performance, Ferrous Metals Series Struggle to Rebound in the Short Term

Last week coincided with the domestic Double Festival holiday. During the holiday, except for the first round of coke price increases being implemented on October 1, most spot markets for other ferrous metals remained stable, largely closed for the holiday. With sluggish market demand, post-holiday inventory for the five major steel products accumulated significantly compared to the pre-holiday period, with the accumulation rate far exceeding that of the same period last year. On the first working day after the holiday, although futures saw a rebound, terminal restocking demand fell short of expectations under high inventory pressure. On the macro front, the EU formally announced the strictest-ever steel import ban on October 7, reducing the tax-free import quota to 18.3 million mt per year, down 47% from 2024, increasing the tariff on excess portions from 25% to 50%, and adding new traceability requirements for the origin. The US also announced that it will impose a 25% tariff on imported medium and heavy-duty trucks starting November 1, further escalating trade barriers faced by Chinese steel and steel products. There were no new updates on the previously mentioned stricter management of bill purchases scheduled for October 1.

In the short term, according to SMM survey tracking, hot metal production this week decreased by 1,400 mt WoW. Recent environmental protection impacts in the Tangshan area may disrupt the recovery of hot metal production. However, considering that steel mills still have restocking demand after the holiday, cost support remains effective in the short term. For steel products, post-holiday terminal restocking demand release fell short of expectations, while supply pressure is relatively high, and it will take time to alleviate the inventory accumulation. Overall, the strong performance of raw materials will provide support for the ferrous metals series, but the supply-demand imbalance in the finished steel segment will drag on the upward trend of the ferrous series. Therefore, it is expected that the ferrous metals series may continue a rangebound fluctuating trend next week, with raw materials still performing stronger than finished steel.

Iron Ore: Stronger Macro Expectations, Accumulating Supply-Demand Imbalance, Prices Fluctuate Rangebound

The first week after the holiday had only two working days. Imported iron ore prices showed a strong, fluctuating trend, with the price center slightly moving higher. Fundamentals weakened slightly but had limited impact on prices; this week's ore price increase was mainly driven by the macro perspective. Consequently, futures gains were larger than spot gains. The weekly average price for PB fines at Shandong ports rose by only 9 yuan/mt WoW. Looking ahead to next week, iron ore supply pressure is gradually emerging. Constrained by environmental protection-driven production restrictions and shrinking steel mill profits, the upside room for further increases in hot metal production is limited. SMM expects daily average hot metal production may see a slight decline next week. Overall, the iron ore supply-demand imbalance is accumulating but has not yet intensified. From a macro perspective, close attention should be paid to the Politburo meeting on October 20, as the market maintains optimistic expectations for subsequent policies, which are expected to provide some support to ore prices. Comprehensive judgment suggests that SMM expects iron ore prices may show a repeated fluctuating pattern next week, with the possibility of a slight upward shift in the price center.

Coke: Market Generally Stable with Slight Rise, Second Round Increase Still Has Chance to Materialize

In terms of supply, after the first round of coke price increases took effect, coking plant profits saw some recovery, and most coking plants slowed down their production cut pace. Demand side, due to logistics disruptions during the National Day holiday and rainy weather in the north, steel mill coke arrivals were average, overall at a medium level, but steel products saw inventory buildup, curbing steel mills' purchase enthusiasm. Raw material fundamentals, mainstream coal mines are operating normally, coking coal inventory remains at medium-low levels, individual mines implemented slight production cuts, a coal mine accident occurred in Hunan, regional mine safety supervision may tighten. Market inquiries were limited, transactions were limited, coal mines mainly executed previous orders, some high-priced coal types saw slight corrections, short-term coking coal prices are expected to remain stable. In summary, the coke market shows a supply-demand balance, but there is upward price momentum, short-term coke market is expected to be generally stable with slight rise, the second round of increase still has a chance to materialize.

Steel Scrap: Weak Supply and Demand, Follow-up Focus on Steel Mill Profits and Finished Steel Destocking

During the National Day holiday, the domestic steel scrap market exhibited "weak supply and demand" characteristics. Supply side, during the holiday, steel scrap recycling bases nationwide saw reduced purchase and processing volumes, leading to continuously low arrivals of scrap at steel mills; post-holiday, although gradually returning to normal, market resource replenishment speed remained relatively slow. Demand side, affected by futures fluctuations, market wait-and-see sentiment was strong, transaction performance was average, downstream steel demand release remained moderate, some electric furnace mills, constrained by both weak market conditions and high cost pressure, had limited production enthusiasm, maintaining cautious purchasing strategies for steel scrap. Overall, currently the steel scrap market is constrained by both cost and demand, short-term prices are expected to continue moving sideways, follow-up requires close attention to changes in steel mill profits and finished steel destocking.

Rebar: Supply Pressure Expected to Ease, Market "Key" Lies in Demand Side

Post-holiday rebar prices fluctuated rangebound, current nationwide average price is 3,104 yuan/mt, down 25 yuan/mt WoW from pre-holiday. Supply side, currently blast furnace steel mill profitability has declined, several mills' net profits are basically around the break-even line, some mills in northwest China continue to operate at a loss, overall enthusiasm for producing construction steel has decreased, individual mills already have expectations to switch to producing plate/coil; during the holiday, although steel scrap prices declined, difficulties in scrap collection persist, electric furnace mill loss improvements are limited, short-term they continue to maintain peak/off-peak electricity production pace. Demand side, post-holiday downstream restocking demand release was noticeable in east China, but south China and north China continued to be affected by rainy weather, transaction performance was relatively poor, overall post-holiday downstream demand release still fell short of expectations. Inventory side, market arrivals were normal during the holiday, and inventory accumulation was significant, with some resources not yet delivered to the market, and the accumulation rate at producer's warehouses was greater than that of social inventory. Overall, market sentiment and transactions varied significantly by region. After the holiday, producer inventory pressure was relatively high. In the short term, agents may prefer to "take profits" and focus on accelerating shipments, putting spot prices under pressure to rise. However, considering that steel mills are approaching annual maintenance, supply-side pressure is expected to ease, which may support bottom prices. Spot prices are expected to fluctuate rangebound next week, with limited upside and downside room.

Hot-Rolled Coil: Cost Support and Macro Tailwinds, Prices Expected to Rise Slightly Next Week

After the National Day holiday, the hot-rolled coil market operated with volatility, with relatively small changes in overall transaction volume. Supply side, hot-rolled maintenance at steel mills decreased this week, and hot-rolled coil production increased slightly. Demand side, market demand declined significantly after the holiday, with weak market confidence and cautious purchasing, leading to a downward trend in weekly apparent demand for hot-rolled coil. Inventory side, post-holiday SMM data showed social inventory of hot-rolled coil reached 4.0965 million mt, up 457,900 mt WoW, an increase of 12.58% WoW. Social inventory accumulated substantially in the first week after the holiday nationwide. By region, South China and North China saw the largest accumulations, both exceeding 15%, while East China, Central China, and North-east China had accumulations below 10%. Cost side, the first round of coke price increases was implemented during the National Day holiday, and iron ore prices rose slightly, strengthening overall cost support for hot-rolled coil. Looking ahead, coke producers are preparing for a second round of price increases, and iron ore prices may continue to rise, further strengthening cost support. Combined with recent macro tailwinds from policy measures, hot-rolled coil prices are expected to rise slightly next week. The most-traded contract is forecast to trade in the 3,230-3,340 range.

1. For data mentioned in the report, please visit the SMM database (

2. For more SMM steel news, analysis reports, databases, etc., please contact SMM Steel Division Li Ping at 021-51595782.

*The views in this report are based on market-collected information and comprehensive evaluation by the SMM research team. The information provided in the report is for reference only, and investors assume their own risks. This report does not constitute direct investment research recommendations. Clients should make decisions cautiously and not use this report as a substitute for independent judgment. Any decisions made by clients are unrelated to SMM. Additionally, SMM is not responsible for losses or liabilities resulting from unauthorized or illegal use of the views in this report.

SMM reserves the right to modify and ultimately interpret the terms of this statement.