Macro Stimulus Temporarily Eases, Ferrous Metals Expected to Maintain Sideways Movement [SMM Steel Industry Chain Weekly Report]

Forecast for Next Week: Macro Tailwinds Temporarily Ease, Ferrous Metals Expected to Move Sideways

This week, ferrous metals rose first and then fell, with an overall upward trend. In the first half of the week, due to the release of news over the weekend that "China and the US reached a basic consensus in consultations," coupled with mid-week announcements from five government departments addressing "involution-style" competition, ferrous metals opened high and surged rapidly. In the latter half of the week, on the fundamental side, inventories of the five major steel products continued to draw down. On the macro front, the US Fed cut interest rates by 25 basis points, and China and the US held a successful meeting, but there were no talks that exceeded expectations. Market sentiment pulled back after peaking, and ferrous metals prices followed suit. In the spot market, futures fluctuated sharply this week, market activity increased, with both speculative and arbitrage demand entering the market, but end-users remained relatively cautious.

In the short term, according to SMM survey tracking, due to the impact of environmental protection-driven production restrictions in Hebei, daily average hot metal production fell by 24,000 mt WoW. However, with the lifting of the heavy pollution emergency response, hot metal production is expected to rebound next week. Coupled with expectations for a third round of coke price increases and continued strict safety inspections at coal mines, cost-side support remains strong in the short term. On the steel side, inventories of the five major steel products continue to draw down, fundamentals are in line with seasonal trends but slightly weaker than the same period last year. Overall, macro tailwinds pushed ferrous metals to highs this week, but there are no new immediate macro drivers expected in the short term. Although raw material costs provide some support, the weak reality of finished steel shows limited improvement and cannot provide strong momentum. Ferrous metals are expected to maintain a narrow, fluctuating trend next week.

Iron Ore: Macro Sentiment Supports, Fundamentals Weaken, Prices May Fluctuate at Highs

This week, iron ore prices fluctuated upward. Despite weakening fundamentals, macro tailwinds continued to support ore prices. Port spot prices for PB fines in Shandong ports averaged a weekly increase of 20 yuan/mt WoW. Looking ahead to next week, macro news will continue to influence prices. Fundamentally, with the lifting of environmental protection-driven production restrictions in Hebei, steel mills will resume normal production on November 1, and hot metal production is expected to rebound to over 2.4 million mt, providing support for ore prices. However, considering the significant price increases from domestic mines next week and the high likelihood of a third round of coke price increases, steel mill profits will be further squeezed, increasing their willingness to conduct maintenance. Iron ore demand is expected to weaken further, putting downward pressure on prices. Therefore, iron ore prices are anticipated to be caught in a dilemma next week, maintaining a fluctuating trend at highs, but the average price may be slightly higher than this week's.

Coke: Fundamentals Remain Tight, Strong Expectations for Third Round of Price Increases Next Week

On the news front, major coke companies initiated a third round of coke price increases, but as of Friday afternoon, no steel mills had responded. Supply side, some coke enterprises saw declining production enthusiasm due to losses and environmental protection factors, leading to reduced coke output, and supply may continue to tighten. Demand side, environmental protection-driven production restrictions in Hebei have been lifted, and hot metal output is expected to recover next week. Some steel mills with low inventory are urging deliveries, indicating strong rigid demand for coke. Raw material fundamentals, output from overproducing coal mines remains restricted, making it difficult to release coking coal supply. Coupled with recent recovery in downstream demand, low coal mine inventory, and favorable market trading atmosphere, online auction prices have mainly risen. Coking coal prices are expected to continue increasing next week. Overall, coke supply-demand fundamentals remain tight, and the third round of coke price increases is highly likely to be implemented next week.

Steel Scrap: Tug-of-War Between Sellers and Buyers Continues—When Will the Fluctuating Market Pattern Break?

Recently, the domestic steel scrap market has shown a fluctuating trend, with no significant improvement on either the supply or demand side. Supply side, current supply remains sluggish, and suppliers are cautious about future market trends. Due to unclear market expectations, most suppliers are not actively releasing resources, showing weak willingness to sell. Demand side, affected by fluctuations in futures, market participants exhibit strong wait-and-see sentiment. End-users mainly restock based on rigid demand, and the overall pace of steel demand release remains moderate. Currently, some steel enterprises are in a loss-making state, significantly strengthening control over raw material procurement costs. Overall, the steel scrap market is influenced by both positive and negative factors. Although the tight supply pattern provides some support for scrap prices, weak demand makes it difficult to form an effective boost. Therefore, steel scrap prices are expected to maintain a fluctuating trend in the short term. However, for some steel mills with moderate scrap arrivals, there is a possibility of slightly reducing scrap procurement prices to further compress costs and improve profitability.

Rebar: Sentiment Drives Phased Price Increases, but Weak Reality May Limit Upside Potential

This week, rebar prices fluctuated upward, with the current nationwide average price at 3,108 yuan/mt, up 44 yuan/mt WoW. Supply side, recent steel mill profits continued to compress, with widespread losses on production. Several steel mills in North China have scheduled maintenance plans by year-end, and supply pressure may remain lower than the same period in previous years. EAF steel mills are also experiencing losses, mainly producing specific specifications or high-value-added products. This week's operating rate slightly declined, but considering some mills aim to maintain annual production targets, they are likely to sustain current production levels in the near term. Demand side, the rising trend at the beginning of the week improved market trading atmosphere. Additionally, some projects in Northeast China are expected to rush to meet deadlines, and previously suppressed demand in South China saw some release, resulting in moderate overall transactions. Inventory side, both mill and social inventory continued destocking, but levels remain higher than the same period last year. In the short term, producers still face destocking pressure. Overall, the October peak season demand failed to materialize. As winter sets in in northern regions, outdoor construction is constrained, and demand is expected to weaken seasonally. During this transition from peak to off-season demand, with total inventories at a high level YoY, producers are prioritizing faster shipments, limiting the upside for spot prices in the short term. Currently, there is an expectation of a third round of coke price hikes, and cost-side factors continue to provide some support to the bottom of spot prices. Spot prices are expected to continue fluctuating rangebound next week, with relatively limited upside and downside room.

Hot-Rolled Coil: Macro Tailwinds Temporarily Subside, Prices Expected to Be in the Doldrums

This week, HRC prices rose first then fell, with spot prices up 20-60 yuan/mt WoW. Trading sentiment during the week was moderate to weak, making it difficult to sell at higher prices. Key macro events during the week primarily revolved around US Fed interest rate cuts and China-US talks, which boosted market sentiment and strengthened futures. Coupled with the impact of environmental protection-driven production restrictions in Tangshan, which kept ore prices holding up well, and the implementation of coke price hikes, overall cost support remained relatively strong. Returning to the HRC supply-demand pattern, a slight correction in short-term supply, marginal improvement in demand, and a slight reduction in inventory pressure led to some improvement in fundamentals. On the export front, overall HRC exports weakened WoW, with order intake lagging behind the previous week. Prices rose too rapidly, and overseas customers showed limited acceptance. Looking ahead, considering that the impact from steel mill maintenance is expected to decrease next week and macro tailwinds have temporarily subsided, prices are forecast to be in the doldrums next week, with the most-traded contract fluctuating in the range of 3,250-3,330.

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

2. For more SMM steel news, analysis reports, databases, and other content, 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 or decision-making advice. Clients should make decisions cautiously and not use this report to replace their own independent judgment. Any decisions made by clients are unrelated to SMM. Furthermore, SMM is not responsible for any 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.