SMM daily comment on domestic HRC market (Sep 1)

SHANGHAI, Sep 1 (SMM) – HRC futures moved upwards today, closing up 1.82% at 3,982 yuan/mt. In the spot market, mainstream offers for HRC hiked after a drop this week. This week witnessed a mild increase in HRC production and acceleration of inventory build-up. However, HRC market activity picked up, owing to more favorable macroeconomic policies released on Thursday and Friday, and HRC prices hiked accordingly. From a follow-up perspective, on the cost side, given weaker-than-expected impact of policy on crude steel output limitations, molten iron production may increase next week, bringing with it demand for iron ore. Therefore, iron ore market may swing in firmness, further increasing HRC costs. From the demand side, downstream demand may improve amid a peak season. In addition, more positive macro news were reported, and previous favorable policies were implemented. Market sentiment picked up, which is expected to drive a steady recovery in downstream demand. Therefore, bolstered by bullish costs and a peak demand season, HRC 2401 contract next week may fluctuate strongly in a range of 3,850-4,200 yuan/mt, and HRC price may swing in a range of minus 50 yuan/mt to plus 150 yuan/mt.