HRC Futures Decline Amid Supply Pressure and Weak Demand, But Downside Limited

The most-traded HRC futures contract has declined for three consecutive days, closing at 3,321 today, down 0.99%. In the spot market, HRC prices fell mainly by 10-20 yuan/mt during the day.

Supply side, according to the SMM survey, the planned HRC production in January is expected to increase by 706,700 mt MoM, and supply pressure remains unresolved. Demand side, the futures market showed weakness, with downstream end-use demand exhibiting a strong wait-and-see sentiment. Coupled with the approach of year-end, the seasonal weakening of downstream demand is hard to reverse, leading to an accumulation in social inventory in both northern and southern regions this week.

In summary, the fundamental imbalance in the HRC market is gradually accumulating. However, the overall accumulation has not exceeded expectations. Therefore, the downside space for the most-traded HRC futures contract is expected to be limited in the short term. Further attention should be paid to the development of overseas macro bearish factors and the domestic winter stockpiling situation. Once the bearish sentiment is digested, prices may stabilize.