In the short term, ferrous metals are consolidating at lows, and close attention should be paid to steel mill maintenance situations [SMM Steel Industry Chain Weekly Report]

Forecast for Next Week: Ferrous Metals in Short-Term Consolidation at Lows, Focus on Steel Mill Maintenance

This week, finished steel continued to drift lower, while raw materials began to stabilize, with coking coal rebounding. During the week, rumors of coal mine accidents in Shanxi and customs clearance restrictions at the Mongolia border boosted sentiment, and combined with talks involving Chinese miners, raw materials rebounded from lows. In the second half of the week, as rumors of steel mill maintenance across regions emerged, negative feedback expectations intensified, and raw materials pulled back slightly. However, near the weekend, the 10th round of coke price increase was proposed, driving coking coal and coke futures higher. In the spot market, the off-season characteristics for end-users became increasingly evident, with the market restocking at low prices based on demand. With spot prices relatively firm, the spot-futures price spread continued to widen.

In the short term, according to SMM survey tracking, weekly average hot metal output fell by 4,700 mt WoW this week, with hot metal continuing to pull back. Subsequently, with expectations of narrowing profit margins and intensified environmental protection efforts, hot metal output remained on a downward trend, with the pullback pace exceeding market expectations. The 10th round of coke price increase was proposed, but the difficulty of implementation may have increased compared to earlier, keeping cost support in the doldrums in the short term. Steel side, the persistent plum rains in south China continued to affect outdoor operations, fully exposing the off-season nature of finished steel. Overall, ferrous metals were in a macro vacuum period, coupled with the industrial demand off-season, and are likely to remain in a consolidation phase at lows in the short term. The focus will be on steel mill maintenance situations to assess the strength of raw material support.

Iron Ore: Prices Under Pressure and Weak as Blast Furnace Maintenance Plans Increase

Iron ore prices showed a first-rise-then-fall trend this week, with the price center continuing to shift downward. The core driver was that losses at steel mills further widened, combined with expectations of environmental protection-driven production restrictions in some regions, increasing blast furnace maintenance plans, and hot metal output continuing to pull back, putting significant pressure on demand. During the week, the market once heard that contract negotiations might restrict port cargo pick-up of low-grade ore inventories, fueling a short-term rebound in futures. Spot prices performed weaker than futures. In port spot cargoes, the weekly average of the MMI 61% index fell by 5 yuan/mt WoW.

Looking ahead to next week, the 10th round of coke price increase has a high chance of being implemented. Steel mill losses will lead to further increases in maintenance, widening the decline in hot metal output. Iron ore demand will continue to weaken. Meanwhile, June saw a rush in mine shipments, and imported ore port arrivals will still have upside room in the next two weeks, with port inventories slightly accumulating. Additionally, the U.S.-Iran negotiations in mid-month are expected to see crude oil prices decline, keeping iron ore shipping costs weak. Iron ore prices will remain under pressure. However, considering the disturbance from contract negotiation news, this may give prices a chance to rebound. Iron ore prices are expected to continue weak trading next week.

Coke: Market May Stabilize with a Firmer Bias, with Game-playing Likely for the 10th Round of Price Increase

In news, coke producers in various regions proposed the 10th round of coke price increase, effective from midnight on July 6, 2026. Supply side, the ninth round of coke price increases took effect, leaving most coking enterprises with profits and moderate production enthusiasm. However, downstream purchasing interest weakened, and traders actively shipped out inventories, leading to increased coke supply. Demand side, recent downward drift in steel mill finished product prices further squeezed steel mill profits, prompting mills to begin cutting hot metal output. Expectations of further declines in hot metal production also weighed on rigid demand for coke. Coking coal side, progress in resuming production at mines in Qinyuan County remained slow, and some mines experienced varying degrees of production cuts after resuming operations, keeping coking coal supply tight. However, downstream buyers showed height-phobia sentiment, sales of certain high-priced coal grades deteriorated, and online auction failures increased significantly. In the near term, the coking coal market may start to stabilize. In summary, market sentiment weakened. In the short term, the coke market may hold up well with slight upward bias, and the tenth round of price increases is likely to face negotiation.

Steel scrap: a tug-of-war between low inventory and weak demand; prices expected to continue consolidating at lows in the near term

On the supply side, rainy weather pushed down operating rates at upstream yards, limiting scrap processing and output capacity. On the demand side, end-user demand entered the traditional off-season, and steel price weakness squeezed mill profits. Scrap’s cost advantage over hot metal eroded. Meanwhile, blast furnace mills mostly purchased scrap as needed, maintaining low inventory strategies due to difficulties in tax invoice issuance and long collection cycles. EAF steel mills suffered from poor per-tonne steel profitability, with some electric furnace mills cutting operating hours, leading to lower scrap demand. Taken together, the market’s core conflict remains the tug-of-war between low inventory support and weak demand compression. Near-term China steel scrap prices are expected to continue consolidating at lows.

Rebar: supply-side reduction expectations exist, but weak demand makes it hard to support bottom-level prices

This week, rebar prices drifted lower, with the nationwide average price at 3,089 yuan/mt, down 20 yuan/mt WoW from last Friday. Supply side, mill profitability continued to shrink, and a few blast furnace steel mills have scheduled maintenance and production cut plans, though most are still operating at previous levels. Attention will remain on further production cuts. EAF steel mills across regions showed some divergence in profitability. In the southwest region, rainy season electricity price subsidies kept profitability relatively good, with most mills maintaining previous utilization. In east China, peak-hour electricity price adjustments during the summer impacted operations, and in south China, high inventory pressure led mills to cut operating hours, pushing overall EAF production lower. Demand side, phase one rainfall in east China this week slowed project construction progress. In central and northwest regions, the impact of low-priced resources from external areas made downstream purchasing more cautious, and overall transaction performance was moderate. Inventory side, total inventory continued to edge up. Given weak demand expectations, social inventory is expected to continue its phased accumulation trend. Going forward, profit margins on the supply side are worsening and production motivation is weakening, but weak demand provides limited support for bottom-level prices. Although sentiment-driven momentum exists on the raw material side, the rebar fundamentals remain difficult to reverse. In the short term, market prices may consolidate near the bottom, and later attention should be paid to the pace of inventory buildup.

HRC: Supply-Demand Imbalance Continues to Accumulate, Prices Extend Bottom-Level Consolidation Pattern

This week, cold- and hot-rolled prices continued to weaken, with overall transactions staying at relatively low levels. Supply side, the impact from maintenance on rolling lines decreased WoW, and HRC production edged up slightly. Demand side, apparent demand declined WoW. Inventory side, HRC social inventory at 86 warehouses nationwide (large sample) tracked by SMM stood at 4.3757 million mt, up 84,500 mt WoW, or +1.97% WoW, and +43.10% YoY in lunar calendar terms. By region, all markets saw inventory buildup WoW, with the Northeast market showing a relatively more pronounced buildup. Cost side, the ninth round of coke price increases was implemented this week. Influenced by market news turbulence on raw materials, the cost side showed a pattern of first strengthening then weakening. Going forward, although the market initiated the tenth round of coke price increases, hot metal output has peaked and is gradually pulling back, so cost support is expected to be flat compared with previous expectations. From the perspective of HRC fundamentals, the supply-demand imbalance continues to accumulate. Under off-season demand, inventory pressure is expected to keep mounting, weighing on prices. Combined with some support from the cost side, downside room for prices is relatively small. Next week, HRC prices are expected to show a bottom-level consolidation pattern, with the most-traded HRC contract trading in the range of 3,250-3,330.

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