Post-Holiday Ferrous Metals May Still Face Possibility of Correction [SMM Steel Industry Chain Weekly Report]

Forecast for next week: Ferrous metals may still have a chance of correction after the holiday

This week, ferrous metals first rose then fell. Before the holiday, there was no significant change in domestic macro conditions. At the beginning of the week, news emerged that a Brazilian pellet plant expected to reduce production. Coupled with market expectations of an increase in hot metal and pre-holiday stockpiling, iron ore prices rose significantly, driving up finished steel prices. Coke prices saw four rounds of decreases gradually implemented, with further price cuts expected, leading to a weaker trend. In the spot market, although it was close to the New Year's Day holiday, end-users showed little willingness to restock before the holiday. Under rising prices, most purchases were just-in-time procurement, with a strong wait-and-see sentiment. Additionally, year-end capital recovery made it difficult for demand to be released.

In the short term, according to SMM survey tracking, the daily average hot metal increased by 2,600 mt MoM this week. Hot metal is expected to steadily rise in January, but considering that steel mills' raw material restocking demand may only appear in the middle to late part of the month, the support from the raw material side will become clearer at that time. For steel, the five major products continued to deplete inventory this week. With increasing production, supply-side pressure is expected to slightly rebound. Overall, the current ferrous metals lack clear drivers. Recently, customs announced that electronic data interconnection verification will be implemented for export goods, starting from the New Year. The export license policy, which will be enforced more strictly, may increase export risks. After the holiday, ferrous metals may enter another phase of correction to find a bottom, but the downside space is also relatively limited.

Iron Ore: Imported ore prices rise against high inventory, expected to maintain upward momentum next week

Since mid-December, iron ore prices have bottomed out and rebounded. The core contradiction in the current market is no longer total surplus, but rather the structural shortage of mainstream medium-grade ores. Although the total port inventory remains high, the inventory of mainstream medium-grade ores (such as PB fines) has significantly declined, making their structural tightness the key factor supporting firm ore prices. Entering January, the increase in hot metal production and pre-holiday stockpiling by steel mills have jointly boosted iron ore demand. According to SMM data, as of December 26, the iron ore inventory of sample steel mills was 75.52 million mt. Following past patterns, to ensure production during the Chinese New Year holiday, steel mills typically have a concentrated restocking demand before the holiday, estimated to be at least 15 million mt, significantly boosting short-term procurement demand. Moreover, the market holds strong expectations for the macro policies in 2026, the start of the "15th Five-Year Plan" period, with overall macro sentiment being optimistic. This further boosts iron ore prices from a financial and expectation perspective, and ore prices are expected to maintain upward momentum. In this "high total, tight structure" pattern, ore prices show strong upward momentum against high inventory. Subsequently, attention should be paid to the pace of steel mill restocking and the inventory reduction of mainstream ore types. Potential risks to watch include: one, after the long-term iron ore contract negotiations, high-inventory medium-grade ores such as JMB fines at ports may be released in large quantities; two, if port storage fees are strictly enforced, long-stagnant goods may be cleared at low prices, both of which could put pressure on ore prices.

Coke: Prices Likely to Remain Under Pressure, Fourth Round of Price Cuts to Be Implemented During the Holiday

In terms of supply, the coke market has initiated the fourth round of price cuts, and most coke enterprises have already incurred slight losses, leading to a decrease in production enthusiasm and a slight tightening of coke supply. On the demand side, blast furnaces at steel mills are maintaining stable operations, creating a rigid demand for coke. However, with continuous declines in finished product prices and adequate coke inventories at steel mills, the willingness to purchase coke is low, mainly purchasing as needed. Regarding the fundamentals of raw materials, as year-end approaches, safety inspections increase, and coal mines maintain normal production, resulting in limited supply increments. With the fourth round of coke price cuts by steel mills, market sentiment further weakens, downstream demand becomes cautious, and the willingness to stockpile is not strong. The trading sector remains largely on the sidelines, and the spot coking coal market is sluggish, with some coal mines experiencing a slowdown in order signing. Overall, online transaction prices continue to fall, and some coking coals still face unsold lots. In summary, there is still room for coking coal prices to decline after the holiday. Overall, the supply-demand structure of coke continues to be loose, and with weak cost support, the fourth round of coke price cuts is about to be implemented, and the coke market will remain in the doldrums in the short term.

Steel Scrap: Ongoing Tug-of-War Between Sellers and Buyers, Prices Continue to Fluctuate Rangebound

On the supply side, as the New Year's Day holiday approaches, some scrap-producing enterprises and processing bases enter a phase of temporary shutdowns. In north China, low temperatures and snowfall reduce the efficiency of scrap collection and transportation, while in south China, processing bases still focus on quick in-and-out operations. On the demand side, steel enterprises currently adopt a cautious and conservative attitude towards scrap procurement, primarily restocking as needed and strictly controlling raw material inventory levels to reduce cost risks. Overall, in the short term, steel scrap prices will continue to fluctuate rangebound, and subsequent attention should be paid to the pace of winter stockpiling strategies by steel mills and weather changes in the north.

Rebar: Increased Weather Impact, Spot Prices Face Downside Risk

This week, rebar prices fluctuated upward, with the nationwide average price now at 3,182 yuan/mt, up 11 yuan/mt WoW. On the supply side, EAF steel mills have shown better profitability, with profits for many mills ranging from 50-80 yuan/mt. Some mills have also increased their flat electricity usage to full capacity, and there are expectations for some southwestern mills to resume production after the holiday, leaving room for a slight increase in operating rates. Blast furnace steel mills have recently been hovering around the break-even point, and some mills in North China have resumed production to complete their product specifications, leading to a slight increase in production. On the demand side, with the end of the year, many end-users have closed their accounts, with funds only flowing in, leading to a decline in procurement volumes. Additionally, starting from Wednesday, a nationwide temperature drop, along with snowfall in central, northwest, and North China, has disrupted transportation, significantly limiting demand. After January, demand is expected to gradually shrink. Looking ahead, with a macro policy vacuum period, market trading returned to fundamentals in the first and middle ten days of January. Some steel mills planned to resume production in January. Supply side, production increased while demand decreased, putting downward pressure on spot prices. However, in the middle and late ten days of January, steel mills faced raw material restocking and traders entered the winter stockpiling phase, which may provide some cost support from the raw material side. Nevertheless, price negotiations among producers for winter stockpiling could lead to wide fluctuations in spot prices.

Hot-Rolled Coil: Bearish Factors Accumulated After the Holiday, Prices Expected to Decline

This week, hot-rolled coil prices weakened slightly, with the price center moving lower. Pre-holiday market confidence was insufficient, and overall transaction conditions deteriorated. Supply side, maintenance of hot-rolling production lines at steel mills increased further this week, leading to a decline in hot-rolled coil production. Demand side, the market remained in the off-season this week, and pre-holiday restocking demand had basically ended, resulting in a weekly apparent demand decrease for hot-rolled coil. Inventory side, the pace of inventory drawdown slowed this week, putting pressure on hot-rolled coil prices. Cost side, coke prices stabilized temporarily before the holiday, while iron ore prices rose, strengthening cost support for hot-rolled coil. Looking forward, frequent news about steel export licenses disturbed market sentiment. After the New Year's Day holiday, export order-taking and shipments may be negatively affected. Additionally, coke prices are expected to decline after the holiday, which may weaken cost support for hot-rolled coil. Coupled with inventory accumulation during the holiday, bearish factors for the hot-rolled coil market accumulated. The most-traded hot-rolled coil futures contract is expected to trade in the range of 3,200-3,300 after the holiday.

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

2. For more SMM steel news, analysis reports, databases, and other content, please contact Li Ping from the SMM Steel Division at 021-51595782

*The views in this report are based on information collected from the market and comprehensive evaluations 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 advice. Clients should make decisions cautiously and not use this report to replace their 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 has the final interpretation right for the terms of this statement.