Ferrous Metals May Continue at High Levels in the Short Term [SMM Steel Industry Chain Weekly Report]

Forecast for Next Week: Ferrous Metals May Continue to Stay at Highs in the Short Term

This week, ferrous metals retreated after a rapid rise. At the beginning of the week, the market reported last week that Asia shifted to coal-fired power generation due to natural gas supply deficits, and Indonesia planned to increase coal production and impose export taxes. The rise in international coal prices transmitted to China, with coking coal and coke leading the ferrous metals rally. Mid-week, the Middle East situation fluctuated, with the US and Iran holding divergent attitudes toward war, and ferrous metals consolidated at highs. The pullback in the second half of the week was mainly driven by the weakening of cost-side logic, as market rumors suggested that iron ore long-term contract negotiations had been completed, reducing expectations of iron ore supply tightening, and raw materials shifted to a pullback-driven trend. Spot market side, speculative activity and end-user purchasing enthusiasm improved in the first half of the week, while the second half remained dominated by rigid demand, with the spot-futures price spread widening somewhat. In the short term, according to SMM survey tracking, daily average hot metal production rose by 15,000 mt WoW this week, with subsequent maintenance units continuing to resume production. Meanwhile, disruptions on the iron ore and coking coal and coke fronts persisted, and short-term support from the raw material side may still exist. Steel side, end-use demand continued to recover, and inventory of the five major steel products continued to decline. Overall, both supply and demand for finished steel increased, with fundamentals maintaining a weak equilibrium. The short-term operating logic remained on the raw material side, and ferrous metals may continue to fluctuate at highs, but caution is warranted against disruptions from raw material rumors.

Iron Ore: Multiple News Catalysts Triggered High Fluctuations, Prices Still More Likely to Rise Than Fall in the Short Term

Iron ore prices retreated after a rapid rise this week, mainly affected by news-driven disruptions. Looking ahead to next week, from a fundamental perspective, the supply side is expected to see a decline in global iron ore shipments due to cyclone weather in Australia. The demand side is expected to benefit from the continued advancement of blast furnace production resumptions, with hot metal production likely to continue growing, and overall iron ore demand maintaining a steady-to-rising trend. However, uncertain risks remain. If the Middle East conflict eases, energy prices may pull back notably, which would in turn drive down ocean freight rates and weaken cost support for ore prices. Additionally, if long-term contract negotiations are concluded and mid-grade resources are released in a concentrated manner, this could also suppress ore prices. On the premise that the aforementioned risk factors have not materially occurred, ore prices still have the momentum to rebound and challenge new highs.

Coke: Cost Support Continued to Strengthen, Price Increase May Be Implemented Next Week

News side, some steel mills planned to raise wet-quenched coke prices by 50 yuan/mt and coke dry quenching prices by 55 yuan/mt, effective from midnight on April 1, 2026. In terms of supply, coking enterprises currently had good shipment conditions, and coke inventory remained at relatively low levels. Moreover, coking costs increased significantly, strengthening coking enterprises' willingness to push for price increases. Demand side, steel sales improved somewhat, and steel mills were in the stage of resuming production, with hot metal production on an upward trend, boosting enthusiasm for coke purchases. Coking coal side, mainstream mines maintained normal production. Recently, coking coal prices stabilized and rebounded, market sentiment improved notably, online auction trading volume increased, some downstream coke and steel enterprises actively purchased, mines had good pre-sale orders with optimistic sentiment, and coking coal prices may continue to be generally stable with slight rise next week. In summary, the first round of coke increase may be implemented next week, and the short-term coke market may hold up well.

Steel Scrap: Fundamentals Maintain Weak Balance, Prices May Maintain Fluctuating Trend Next Week

Supply side, as weather warmed up and processing enterprises resumed work, steel scrap output increased WoW. Demand side, some EAF steel mills resumed production as planned this week, electric furnace mills' operating rates continued to rise, and steel scrap demand increased. This week, the operating rate of 50 major construction material-producing EAF steel mills nationwide was 40.42%, up 1.78% WoW, but the current weak price trend in the end-user finished steel market suppressed EAF steel mills' profit margins. Enterprise operating performance was mediocre, and most adopted the approach of strictly controlling steel scrap procurement prices to reduce raw material costs and safeguard production profits. Overall, steel scrap supply and demand both increased this week, and the overall fundamental landscape maintained a weak balance. Steel scrap prices are expected to mainly move sideways next week.

Rebar: Supply-demand Imbalance Relatively Small but Market Sentiment Leans Pessimistic

Rebar prices were in the doldrums this week, with the current nationwide average price at 3,145 yuan/mt, down 9 yuan/mt WoW. Supply side, some blast furnaces that were previously under maintenance resumed production this week, with hot metal directed to wire rod production lines. In addition, electric furnace mills continued to resume work this week, and overall construction material production continued on a slight upward trend. Considering the recent compression in steel mill profitability, the pace of active production increases may slow down going forward. Demand side, end-user construction sites mostly purchased on demand recently. Demand in some northern markets continued to improve, but overall demand performance still fell short of the same period last year. Inventory side, both mill inventory and social inventory destocked this week, but the destocking speed fell short of market expectations. Next week, attention should continue to be paid to the destocking trajectory. Currently, market sentiment shifted, with demand performance in some regions underperforming. Traders mostly adopted a "lock in profits" mentality and held a cautious wait-and-see attitude toward the short-term trend. Looking ahead, ex-China macro news caused frequent disruptions with relatively large impacts on raw material prices, but the driving force on finished steel was weak — finished steel even tended to follow declines but not rallies. Currently, the rebar supply-demand imbalance was not prominent, but demand performance showed no impressive improvement. If inventory destocking speed remains slow, price-cutting and dumping by traders in some regions cannot be ruled out. Spot prices are expected to remain in the doldrums in the short term.

HRC: Demand Side Lukewarm, Prices Expected to Move Sideways Next Week

HRC futures were in the doldrums today, down 0.27% for the day, with the most-traded contract closing at 3,299. Futures rose first then fell this week. In the spot market, weekly prices fluctuated by 10-20 yuan/mt, with mediocre transaction performance. News during the week mostly revolved around iron ore negotiations. Under bearish market expectations, ore prices weakened accordingly, while coking coal and coke futures also retreated after rapid rise due to crude oil fluctuations. Returning to hot-rolled coil supply and demand, production moved sideways this week. Downstream demand remained lukewarm, with low purchase willingness for hot-rolled coil, cold-rolled coil, galvanizing, and other products. According to SMM data, total hot-rolled coil inventory was 6.7821 million mt this week, down 89,100 mt WoW. Social inventory maintained an overall destocking trend, but by region, apart from South China and North China markets continuing to destock, inventory in other markets rose to varying degrees. Traders maintained a moderate purchase pace, and mill inventory shifted from increase to decrease. Looking ahead, hot-rolled coil inventory pressure remains relatively high compared with the same period, and fundamentals are unlikely to show impressive performance. Hot-rolled coil is expected to move sideways following the cost side next week.

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