Forecast for Next Week: Market Gradually Digests Bearish Sentiment, Steel Prices May Hold Up Well Following Cost Trends
This week, ferrous metals exhibited a pattern of early weakness followed by strength. At the beginning of the week, after US-Iran peace talks failed to reach an agreement, the US military announced a blockade on all maritime traffic in and out of Iranian ports, pushing international oil prices higher again. Mid-week, disruptions from iron ore long-term contract negotiations intensified, with market rumors suggesting that restrictions on certain previously limited products had been partially lifted. Subsequently, news emerged of an unexpected shutdown at an Australian refinery, raising market concerns that a diesel supply deficit could trigger mine shutdowns and lead to short-term supply tightening. Combined with rising expectations for a second round of coke price increases, ferrous metals rallied successfully in the latter half of the week. Spot market side, as market sentiment improved in the latter half of the week, trading activity warmed up notably. Ex-China, recent inquiry activity from overseas buyers was moderate, with steel billet orders outperforming finished steel products.
In the short term, the impact of Middle East tensions & iron ore long-term contract negotiations is expected to persist. Considering that the market has gradually digested bearish sentiment, the price impact on ferrous metals upon conclusion of negotiations is expected to be limited. Fundamentals side, flat steel products recently saw both supply and demand rise, construction material demand was slightly dragged down but overall inventory continued its downward trend, and the supply-demand imbalance in finished steel was not pronounced. Steel prices are expected to hold up well following cost trends next week. If bearish factors are fully priced in, steel prices still have room for a modest upward breakout.
Iron Ore: Risk of Mid-Grade Ore Inventory Release Remains, Prices Expected to Move Sideways Next Week
Iron ore prices trended upward with fluctuations this week. Rigid demand for iron ore remained relatively strong, and port inventory continued destocking, providing fundamental support for ore prices. In addition, news developments also stimulated futures prices higher. Under the combined influence, iron ore prices saw a slight rebound. Looking ahead to next week, on the imported ore front, short-term end-use demand still has some room for growth, and steel mill profits remain moderate. Steel mills are actively producing, and hot metal production still has room to edge up. With the Labour Day holiday about to arrive, rigid demand for iron ore provides support for ore prices. Furthermore, Middle East conflicts may persist, ocean freight rates remain elevated, and combined with the market's relative sensitivity to the Australian diesel issue, iron ore prices have underlying support. However, the possibility of concentrated release of some mid-grade ore inventory next week cannot be ruled out, which could still impact spot prices. Iron ore prices are expected to move sideways next week.
Coke: Second Round of Price Increases Expected to Materialize, Market May Hold Up Well Next Week
In terms of supply, coking enterprises in Shanxi, Hebei and other regions saw production tighten due to the concentrated push by local governments for ultra-low emission retrofits, but production in other regions rose instead of declining, leaving overall coke supply stable with a slight increase. Demand side, steel mill hot metal production continued to increase, driving strong rigid demand for coke. Steel mills with low inventory had a strong willingness to restock, while most other steel mills purchased as needed with stable rigid demand. Coking coal side, most mines maintained stable production, with some mines releasing capacity in an orderly manner, and overall supply showed an incremental pattern. Downstream players purchased as needed, the online auction market recovered significantly, transaction prices edged up, and overall market trading sentiment improved steadily. In the short term, coking coal prices are expected to maintain a generally stable with slight rise trend. Overall, coke supply and demand remained in a tight balance. The second round of coke increase is expected to materialize, and the coke market may hold up well next week.
Steel Scrap: Lacking Core Drivers, Prices May Move Sideways Next Week
Supply side, shipments from bases showed moderate enthusiasm this week, with relatively small pressure on steel mill arrivals. A few steel mills with low inventory levels were relatively active in purchasing inquiries. Demand side, as steel scrap prices were higher than hot metal, steel enterprises maintained a cautious and conservative attitude toward steel scrap procurement, with weak restocking willingness, mostly relying on rigid purchasing as needed. EAF steel mills were constrained by enterprise operating efficiency, with relatively limited room for continued production increases. According to SMM survey, as of April 14, the operating rate of 50 major construction material-producing electric furnace steel mills nationwide was 42%, up 0.58% from the previous period. Overall, the current market was dominated by strong wait-and-see sentiment, with cautious trading mentality. The steel scrap market lacked clear unilateral drivers, and short-term prices are most likely to move sideways.
Rebar: Demand Performance Unlikely to Show Impressive Improvement, Difficult to Develop Independent Trend
Rebar prices this week moved lower before rebounding, with the current nationwide average price at 3,150 yuan/mt, up 23 yuan/mt WoW. Supply side, steel mills in North China saw relatively stronger comprehensive gross margins for rebar compared to flat steel, and some shifted to increase rebar production this week. Additionally, wire rod transactions in central and western regions underperformed, with some producers reducing wire rod output, resulting in relatively small changes in overall production. In the Southwest region, some electric furnace mills resumed production this week, with operating rates rising slightly. However, overall electric furnace mill profitability hovered around the break-even line, and short-term operating rates are expected to maintain previous production levels. Demand side, demand saw phased volume increases this week, but some regions were affected by weather, and overall transaction performance showed no significant improvement. Additionally, downstream players mostly purchased as needed, with weak stockpiling willingness. Inventory side, mill inventory and social inventory underwent seasonal destocking, but the destocking pace lagged behind the same period last year. Attention should continue to be paid to inventory destocking ahead of the Labour Day holiday. Looking ahead, macro news is currently in a vacuum period, with relatively small impact from sentiment, and market trading has returned to the industry chain perspective. However, rebar's own fundamentals lacked sufficient driving force, demand expectations were weak, and the inventory destocking pace was not enough to boost market sentiment. Therefore, in the short term, prices are most likely to continue fluctuating along with raw material price trends. Considering that steel mills have shown strong willingness to hold prices firm recently, spot prices are expected to fluctuate upward next week.
HRC: Both Supply and Demand Increased, Upside Room for Prices Next Week
HRC prices declined before rebounding this week, with the weekly average price edging up slightly and overall transactions improving WoW. In terms of supply, rolling line maintenance decreased this week, and overall HRC production increased. Demand side, market demand performed well this week. Driven by the sentiment of rushing to buy amid continuous price rise and holding back amid price downturn, the overall market trading atmosphere warmed up. Inventory side, SMM's statistics of social inventory of HRC across 86 warehouses nationwide (large sample) stood at 5.253 million mt this week, down 185,200 mt WoW, or -3.41% WoW. The nationwide social inventory drawdown accelerated this week. By region, the Northeast and South China saw faster inventory drawdowns, while North China and the Central-East regions experienced slight destocking. Cost side, disturbances from iron ore long-term contract negotiations intensified. Market rumors suggested that restrictions on certain previously limited varieties have now been lifted, and iron ore prices declined. However, expectations for a second round of coke price increases grew, providing certain cost support for HRC. Looking ahead, both HRC supply and demand are increasing, the supply-demand imbalance is weakening, and cost support is expected to strengthen. In summary, the most-traded HRC contract is expected to hold up well within the 3280-3350 range next week.
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