Finished steel products may maintain a sideways movement trend in the short term [SMM Steel Industry Chain Weekly Report]

Forecast for Next Week: Finished Steel May Continue to Move Sideways in the Short Term

This week, ferrous metals were in the doldrums. Last Sunday afternoon, a converter at a steel mill in Inner Mongolia spontaneously exploded, leading to the blast furnace being shut down for maintenance. The incident also heightened market expectations for stricter safety measures in steel production, resulting in an overall hot metal recovery falling short of expectations. At the start of the week, iron ore led the decline in ferrous metals, with finished steel following suit. Later in the week, the drop in hot metal was better than expected, coupled with a shift in Trump's stance—abandoning tariff threats—which improved market sentiment, leading to a mild rebound in futures from lows. In the spot market, weak futures dampened speculative sentiment, with restocking mainly driven by rigid demand at low prices. Some spot-futures arbitrageurs sold at low prices, and construction materials demand faced further pressure due to weather conditions.

In the short term, according to SMM survey tracking, new blast furnace maintenance occurred in Inner Mongolia and Henan. Daily average hot metal production dropped by 2,100 mt WoW this week, with a slight further decline expected in the near term before growth resumes. However, raw materials still face pre-holiday restocking expectations, providing support that is not easily undermined. For steel products, as the Chinese New Year approaches, end-use demand will continue to decline, and supply-demand imbalance is expected to accumulate. Overall, finished steel currently lacks clear drivers, but rebar has approached the cost level of valley electricity, increasing downward resistance. The short-term focus remains on raw material restocking, and finished steel may maintain a sideways movement trend before the holiday.

Iron Ore: Insufficient Demand Engine Power, Limited Upside Room Next Week

This week, iron ore prices retreated from highs, with the price center clearly shifting lower. However, increased pre-holiday stocking demand from steel mills supported spot prices, resulting in a smaller decline in spot prices compared to futures. For port spot cargoes, the weekly average price of PB fines at Shandong ports fell by 25 yuan/mt WoW. Looking ahead to next week, on the demand side, hot metal production may continue to drop back slightly, but with accelerated restocking pace by steel mills before the Chinese New Year, overall iron ore demand is expected to remain supported. Supply side, global shipments have entered the off-season, leading to a decline in shipments. However, due to previously high shipment levels, port arrivals are expected to remain elevated next week, and port inventory may continue to accumulate. Considering that pessimistic sentiment has been released in futures this week, a technical rebound is possible next week, but the room for rebound is expected to be relatively limited.

Coke: Game Between Coke and Steel Enterprises Intensifies, Prices May Stabilize Next Week

Supply side, some coke enterprises saw improved production enthusiasm due to smooth shipments and inventory drawdown, with most maintaining normal production and focusing on active shipments. Demand side, end-use consumption of finished steel is in the off-season, the price center has shifted lower, steel mill profits have decreased, and with coke inventory at medium to high levels, resistance to coke price hikes has strengthened, leading to purchasing as needed. On the raw material fundamentals, coal mines generally resumed production, coking coal supply gradually increased, while downstream exhibited some restocking demand. Coal mines currently face no inventory pressure. However, as downstream coking coal inventories gradually build, willingness to accept higher coking coal prices has decreased. In the short term, coal mines focus on inventory reduction. Coking coal prices may fluctuate rangebound next week. Overall, the game between coke and steel enterprises intensified, and the coke market is expected to operate steadily next week.

Steel Scrap: Supply-Demand Tight Balance Continues, Weather Becomes Core Constraint

Supply side, recent widespread snowfall in north China continues to affect the region, causing road icing in some areas, reducing steel scrap circulation efficiency and limiting market trading activity; short-term supply pressure remains. Demand side, production at BF and EAF steel mills currently shows relatively small changes, and their procurement pace for steel scrap remains relatively stable, mostly maintaining purchasing as needed. Overall, the steel scrap market maintains a tight balance between supply and demand. Steel scrap prices are expected to fluctuate rangebound in the short term. Subsequent focus should be on weather changes and the implementation pace of steel mills' winter stockpiling strategies.

Rebar: Seasonal Inventory Buildup Begins, Prices Maintain Sideways Movement

This week, rebar prices were in the doldrums. The current nationwide average price is 3,167 yuan/mt, down 27 yuan/mt WoW. Supply side, although production margins at BF and EAF steel mills recently pulled back, blast furnace mills generally maintain slight profits. Thus, previously idled rolling lines mostly resumed production as planned, with rebar production showing a noticeable increase. Considering wire rod digestion speed is relatively slow in some regions, steel mills show low enthusiasm for producing wire rod, mostly maintaining previous levels. Approaching the Chinese New Year, EAF mills will enter their conventional annual maintenance shutdown period. It is understood that shutdown times for various mills are mostly concentrated around late January to early February. Demand side, early in the week, snowfall in many regions disrupted logistics and transportation, significantly limiting shipments. Later in the week, as weather improved, some demand was still released, but overall transaction performance has entered the off-season weakening phase. Inventory side, both mill and social inventories accumulated this week. Some end-user projects will gradually suspend work in early February, marking the traditional demand deterioration period; the market will subsequently be in a phase of seasonal inventory buildup. Looking ahead, during the domestic macro policy vacuum period, commodity sentiment is largely influenced by overseas news. Currently, the building materials supply-demand logic remains unchanged with no strong drivers, and prices will continue to follow raw material price movements. Spot prices are expected to remain in a sideways movement pattern next week.

Hot Rolled Coil: Supply and Demand Both Weak This Week, Room for a Slight Rebound Next Week

Futures prices fell then rose this week. The spot price decreased by 10 yuan/mt compared to last Friday, with weekly transaction performance medium-weak. Apart from the impact of the explosion incident, market news was bearish during the week, and hot rolled coil prices fluctuated rangebound around fundamentals. Supply side, the impact on rolling lines increased this week, and production continued to decline. Maintenance plans are still scheduled in northern regions next week, leaving room for further production adjustments. In terms of inventory performance, levels remain at a relatively high level, while the destocking pace slowed down, reflecting the persistent weak reality of sluggish demand during the off-season. The market primarily engaged in purchasing as needed, with higher volumes at lower prices and average performance in high-price transactions. Although speculative demand increased, it remained limited overall. Combined with moderate cost support, the hot-rolled coil market is currently in a state of weak supply-demand balance, lacking clear upward or downward drivers. Considering the weaker performance in the past two weeks, coil prices are expected to rebound slightly next week, with the most-traded contract moving sideways in the range of 3,270–3,350.

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