SMM review and forecast for HRC market (Aug 7)

HRC futures prices retraced down after a surge last Friday, closing down 0.15% at 3,990 yuan/mt. In the spot market, mainstream offers for HRC this week fell by 50-100 yuan/mt. This week, HRC supply still stood low, while prolonged high HRC prices further lessened terminal demand, and HRC social inventory picked up significantly. In the follow-up, with restart of some steel mills from maintenance, maintenance-induced HRC production losses will drop significantly. Under such circumstance, pressure on the supply side may increase significantly. On the demand side, downstream demand is expected to remain weak as a whole. In addition, floods in the north will also have a certain impact on downstream demand. On the macro side, although there were many favorable macro policies, it will take time for the policies to be implemented. Besides, there was a question over the timing and the strength of the crude steel production reduction policy. HRC prices may fluctuate in a wide range of minus 100 yuan/mt to plus 100 yuan/mt, and HRC 2310 contract is expected to run in the range of 3,850-4,100 yuan/mt.