The black industry chain may hold up well [SMM Steel Industry Chain Weekly Report]

Forecast for Next Week: Ferrous Chain May See Range-Bound Fluctuations

This week, ferrous metals experienced range-bound fluctuations. During the week, futures prices largely followed sentiment swings in capital markets, with no clear fundamental drivers emerging. At the start of the week, the US dollar plummeted, benefiting commodities broadly and triggering a rapid surge across the board. The ferrous metals sector also showed a synchronized upward trend, but its sustainability lagged behind other sectors, resulting in an overall fluctuating pattern. Later in the week, domestic expectations of further RRR and interest rate cuts persisted, but the previously strong-performing ferrous metals and major indices saw some pullback, leading to a decline in capital market sentiment. Post-holiday inventories of the five major steel products shifted from accumulation to destocking, leading to better performance in finished steel products compared to raw materials. In the spot market, a small amount of futures-related buying emerged early in the week, while rigid demand continued to favor restocking at lower prices. In the construction steel segment, northern regions were constrained by low temperatures, leading to widespread suspensions of actual construction projects. In the short term, according to SMM survey tracking, some blast furnaces that were scheduled to resume operations failed to do so on time, leading to a WoW decline in daily hot metal output of 3,200 mt this week. Hot metal production is expected to resume its upward trend, coupled with steel mills' pre-holiday restocking demand expected to kick in & a coke price hike imminent, suggesting raw material cost support will gradually solidify. In the steel sector, inventories of the five major steel products have started to decline again, with finished steel supply and demand currently in a fragile balance. However, the pressure on finished steel supply is set to intensify further, while demand shows signs of marginal weakening, leading to expectations of a deteriorating supply-demand structure. Overall, finished steel currently lacks clear drivers, with attention focused on the actual progress of raw material restocking and macro-level disruptions. Current expectations for raw material restocking demand remain relatively strong, and finished steel may potentially break out of its current range-bound fluctuations into a stronger upward trend.

Iron Ore: Concentrated Restocking by Steel Mills Is About to Begin, Providing Strong Support for Iron Ore Prices

This week, iron ore prices experienced a slight correction after fluctuating at high levels, mainly influenced by an increase in temporary maintenance plans at steel mills, a phased decline in hot metal output, and high prices dampening steel mills' purchasing willingness, leading to a weakening in demand support. Looking ahead to next week, as steel mills gradually resume blast furnace operations, hot metal output is expected to rebound, coupled with the imminent release of concentrated pre-holiday restocking demand, overall iron ore demand is expected to significantly strengthen, providing support for prices. From a macro perspective, recent monetary policy has sent positive signals, with strong market expectations for a comprehensive interest rate cut in China on January 20, likely to further boost market sentiment. Considering both supply-demand dynamics and the macroeconomic environment, iron ore prices are expected to maintain upward momentum in the short term.

Coke: Market Optimism Rises, Expectations for the First Round of Price Hikes to Materialize Next Week

In terms of news, leading coke companies initiated a price hike for coke, effective from 00:00 on January 19, 2026, with wet-quenching coke increasing by 50 yuan/mt and dry-quenching coke by 55 yuan/mt. On the supply side, losses at coke companies widened due to rising coking coal prices, with a few coke companies also affected by environmental factors, leading to a decline in coke oven capacity utilization rates. Simultaneously, purchasing enthusiasm from downstream customers increased, resulting in a gradual decrease in coke inventories at coke companies. On the demand side, steel mills' hot metal output is expected to rise, increasing rigid demand for coke, and with traders diverting supplies, downstream purchasing volumes also increased. In terms of raw material fundamentals, coal mines operated normally with relatively stable supply, market sentiment warmed, downstream purchasing enthusiasm rose, procurement volumes increased appropriately, and with buying-the-dip sentiment emerging, some coal mines received a large number of new orders, significantly reducing shipment pressure. The center of transaction prices for online auctions shifted upwards, suggesting that the coking coal market may perform strongly next week. Overall, market optimism increased, and the coke market is expected to perform strongly next week, with expectations for the first round of coke price hikes to materialize.

Steel Scrap: Supply-Demand Tug-of-War Continues, Rain and Snow Weather May Become a Short-Term Price Variable

On the supply side, seasonal factors led to some sites shutting down, reducing scrap generation and tightening market circulation resources, while traders' wait-and-see sentiment intensified, slowing the pace of shipments. On the demand side, both blast furnace and EAF steel mills saw little change in production, maintaining normal operations, with steel mills' purchasing patterns for scrap remaining relatively stable, characterized by restocking as needed. Overall, short-term steel scrap prices are expected to remain range-bound, with subsequent focus needed on the implementation pace of steel mills' winter stockpiling strategies and the extent of logistics disruptions caused by rain and snow weather next week.

Rebar: Construction Steel Demand Suppressed by Weather, Prices Expected to Continue Fluctuating

This week, rebar prices remained generally stable, with the current nationwide average price at 3,195 yuan/mt, up 5 yuan/mt WoW. The slight price increase during the week was mainly driven by a stronger futures performance on Friday, coupled with base price adjustments in some southwestern regions. Fundamentally, on the supply side, blast furnaces at long-process steel mills and their supporting rebar rolling lines resumed operations as planned, while short-process steel mills maintained recent profitability, with some mills slightly increasing operating hours, leading to a slight increase in supply. On the demand side, persistently low temperatures in northern regions led to widespread suspensions of outdoor construction projects, with sporadic rush-to-complete projects in central and southern regions, and procurement mainly driven by rigid demand, resulting in overall weak demand performance. In terms of inventories, earlier disturbances in sentiment led to increased willingness among agents to pick up goods, accelerating the transfer of mill inventories to social inventories. However, actual demand release during the off-season was limited, leading to a decrease in mill inventories and an increase in social inventories this week, with overall inventories declining slightly. Looking ahead, with the arrival of a strong cold snap next week, construction steel demand is expected to weaken further, potentially accumulating fundamental pressures. It is anticipated that construction steel prices will continue to fluctuate next week, with attention needed on the progress of coke price hikes and steel mills' raw material restocking trends, as there is a possibility that stronger raw material performance could drive rebar prices higher.

Hot Rolled Coil: Cost Support Strengthens, Room for Further Price Increases Next Week

This week, hot rolled coil prices fluctuated, with actual transaction conditions improving. On the supply side, maintenance of hot strip production lines at steel mills significantly decreased this week, leading to an increase in hot rolled coil output. On the demand side, the market remained in the off-season, but demand improved notably, with pre-holiday restocking demand gradually emerging, and weekly apparent demand for hot rolled coil showing an upward trend. In terms of inventories, according to SMM statistics, the national 86-warehouse (large sample) hot rolled coil social inventory stood at 3.7927 million mt this week, down 61,900 mt WoW, a decrease of 1.61%. Social inventories nationwide declined this week. On the cost side, coke prices remained stable this week, while iron ore prices rose, strengthening cost support for hot rolled coil. Looking ahead, domestic expectations of further RRR and interest rate cuts persist, with both coking coal and iron ore expected to strengthen, providing some support for hot rolled coil prices. Additionally, some relief in supply-demand tensions is expected, with the most-traded hot rolled coil futures contract likely to trade between 3,280 and 3,360.

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