[SMM Analysis] Construction Steel Inventory Drawdown Slows Notably

[Europe] Mainstream steelmakers generally raised asking prices with optimistic expectations for Q1 2027, maintaining a slight upward trajectory in ex-works HRC prices across Northern Europe and Italy. Although downstream inventories are gradually normalizing, actual trading remains subdued due to seasonal demand slumps, with market focus shifting visibly to Q1 long-term contract and forward order negotiations. On a regional breakdown, base transaction prices for forward orders from German mills landed at 770–780 EUR/tonne DDP (~865–876 USD/tonne); buyers currently maintain a workable bottom line of 760–770 EUR/tonne DDP (~854–865 USD/tonne), though mills demonstrate a firm stance to support prices; meanwhile, trading in Italy remains relatively quiet. On the import front, buying interest for seaborne cargoes remains sluggish as buyers fear quota exhaustion risks. Among origin offers, Turkish material was quoted into Southern Europe at 620–630 EUR/tonne CFR (~697–708 USD/tonne), but potential anti-dumping duties continue to severely dampen purchasing appetite.

HRC prices were initially weak before strengthening this week, with prices recovering, especially with notable gains in the second half of the week. Overall trading sentiment improved compared with the beginning of the week. In terms of supply, maintenance at HRC production lines increased this week, and overall HRC production showed a downward trend. In terms of demand, apparent demand for HRC weakened simultaneously this week, downstream orders were soft, and inventory was slowly destocked relying on rigid demand. In terms of inventory, this week SMM's survey of HRC social inventory across 86 warehouses nationwide (large sample) stood at 4.7362 million mt, down 93,400 mt or 1.93% WoW. By region, except for slight inventory buildup in east China and northeast China, all other regions saw destocking. In terms of costs, coke prices held steady this week, while iron ore prices edged up, and cost support for HRC remained intact. Looking ahead, coke prices are expected to decline, while iron ore prices are likely to consolidate, weakening cost support for HRC. However, the supply-demand imbalance in HRC is easing, and with the potential removal of tariffs after the shift in control of the US Congress, external demand expectations are improving, which may support a continued rebound in HRC prices. In summary, the most-traded HRC contract is expected to trade in the 3,170-3,250 range next week, drifting higher.