SMM Daily Comments of Ferrous Metals Market (Mar 24)

SHANGHAI, Mar 24 (SMM) - 

Macro

China

PBOC Shanghai Headquarters: RMB loans in the Yangtze River Delta region increased by 603.9 billion in Feb

MIIT: Focus on stabilising bulk consumption such as automobiles and electronics and consolidating the leading position of industries such as NEVs, PV, mobile communications and power equipment

Overseas

US Fed officials agreed on a 25-basis point rate hike

Institutions: About 88% of fund managers expect the US to continue to fall into stagflation after the banking crisis

Raw materials:

Iron ore

Yesterday, iron ore futures fluctuated downward, and the most-traded I2305 contract closed at 854 yuan/mt, down 2.01%. The overall transactions were acceptable. Traders shipped actively, while steel mills held a wait-and-see sentiment. Traded price of PB fines in Shandong moved between 875-890 yuan/mt, down 2-10 yuan/mt from the previous trading day, and that of PB fines in Tangshan was 905 yuan/mt, up 10 yuan/mt.

On the fundamentals, the output growth of pig iron was limited. The demand for finished products has declined, weakening the support for prices. Considering the intensified overseas risk aversion sentiment, funds flew into the East Asian market. Iron ore supply did not grow steadily. Short-term iron ore prices will move rangebound.

Coke

On March 23, the traded price of quasi-first grade metallurgical coke (coke dry quenching) in Lvliang city, Shanxi province, was 2,890 yuan/mt (ex-factory), flat from the previous trading day.

Coal mines maintained normal production, but the downstream demand was poor. Traders held a wait-and-see attitude, resulting in a slack market. Stocks of some coals have accumulated, which, coupled with the recent failure of some online auctions, further dragged down the coking coal quotes.

Coke supply grew with the increase in the coke companies’ profit margins. The downstream companies slowed down the purchases, pushing up the coke inventory held by coke enterprises.
On the demand side, the steel mills with low profits were cautious in purchasing coke.
Downstream companies slowed down the coke procurement, driving up the coke market supply. Stocks carried by coke companies generally stood low. It is expected that coke prices may run stably in the short term.

Steel Scrap

Yesterday, traded price of steel scrap dipped 2-53 yuan/mt at mainstream steel mills.

Finished products:

Rebar

Fed raised interest rates by 25 basis points in the early morning of yesterday, in line with expectations. But the price of rebar futures plunged amid high output. In terms of the spot market, affected by the falling futures prices, the terminals purchased on demand and the overall demand weakened significantly.

On the macro front, although the Fed raised the interest rates as expected, the market was still cautious about the bank crisis. In terms of fundamentals, the weak profits weighed on the rebar output. It is expected that the steel prices may fluctuate.

HRC

Yesterday, the HRC futures prices fell 1.42% to close at 4,221 yuan/mt. In the spot market, transactions in mainstream cities were weak yesterday, and market quotations generally fell.

On the demand side, the growth rate of terminal demand has slowed down. In terms of inventory, the social inventory of HRC across 69 warehouses in China surveyed by SMM was 4.02 million mt, a decrease of 4.94% or 208,900 mt from last week. On the supply side, the weekly HRC output according to SMM statistics increased 86,200 mt from last week. With the impact of maintenance weakening, it is expected that the HRC output will increase further next week. On the whole, under the weak demand and high inventory, the short-term HRC prices will remain weak amid falling cots. At the same time, market players still need to pay attention to the development of macro crisis.