Forecast for Next Week: In the Short Term, Ferrous Metals May Still Struggle to See a Clear Trend
This week, ferrous metals held up well within a narrow range. Late last week, turmoil in the Middle East and escalating US-Iran tensions triggered wild swings in the international energy market; energy and precious metals surged accordingly, while ferrous metals—except coking coal and coke—mostly retreated after rapid rise after the open. Mid-week, although there were bullish expectations around the Two Sessions, no new news emerged; the steel market remained relatively stable, and the pattern of raw materials outperforming finished steel products continued. In the latter half of the week, the Two Sessions’ macro conclusions met expectations, but the futures market had already priced them in earlier; elevated and volatile international oil prices continued to support raw materials, which in turn led ferrous metals to edge up while remaining generally stable. In the spot market, in the second week after the holiday, the market gradually resumed work and production, but with insufficient futures-driven momentum, overall willingness to purchase was not high, and transactions were mainly concluded at low prices.
In the short term, according to SMM survey tracking, this week’s daily average hot metal fell 5,900 mt WoW. The presence of environmental protection-driven production restrictions during the Two Sessions led to a slower-than-expected recovery in hot metal. Going forward, coke still has expectations for further price cuts, but considering overseas inflation, support from the raw material side was neutral in the short term. For steel products, end-users gradually resumed production, and the pace of inventory buildup in the five major steel products slowed. Overall, amid cost increases and warming sentiment driven by overseas conflicts, and with some remaining domestic expectations around the Two Sessions, ferrous metals may maintain a fluctuating trend next week. As the market narrative shifts from expectations to reality, focus should be placed on the extent of demand recovery and when the inventory inflection point emerges, and beware of a downside scenario where contradictions accumulate after a prolonged sideways market.
Iron Ore: Fundamentals Weaken; Risk of an Ore Price Pullback Increases Next Week
This week, iron ore prices showed a fluctuating trend while holding up well. On the one hand, although the Two Sessions did not release strong policy signals, it still provided some support to market expectations, and sentiment improved. Meanwhile, influenced by rumors of tight supply of mid-grade ore, market concerns over supply intensified, further pushing up ore prices. Fundamentals showed a dual-weak pattern in supply and demand, and support still appeared insufficient. For imported ore, iron ore fundamentals are expected to weaken further next week, and progress in long-term contract negotiations should be monitored. If negotiations further suppress transactions of some mid-grade ore, this may, to some extent, increase market circulation of mid-grade ore, thereby providing some support to prices. In addition, policy signals or news-related disturbances during the Two Sessions may still have short-term impacts on the futures market. Overall, ore prices may continue a fluctuating trend next week; fundamentals remained in the doldrums, but volatility risks driven by news should be watched.
Coke: The Market May Be Generally Stable With Slight Fall; After the First Round of Price Cuts, Expectations for a Second Round of Price Reductions Remain
In terms of supply, the first round of coke price cuts was implemented, losses at coke producers widened, suppressing their production enthusiasm. Coke supply is expected to tighten slightly, but coke producers have seen inventory buildup, and supply remains temporarily loose. Demand side, the Two Sessions had already convened, and some steel mills had already carried out blast furnace maintenance, with daily average hot metal output falling and rigid demand for coke weakening. Meanwhile, after the first round of coke price cuts, steel mill profits remained poor, and mills still intended to push for lower prices. For coking coal, most mines had already resumed normal production, with capacity and production continuously being released, making coking coal supply looser. However, the pace of downstream demand recovery was relatively slow, and some mines saw inventory buildup. Coking coal prices were still expected to edge down slightly next week. In summary, the coke market may run generally stable with slight fall, and after the first round of proposed cuts, there were still expectations for a second round of price declines.
Steel scrap: Supply Recovery Lagged Demand This Week’s Supply and Demand Stayed in a Tight Balance
Supply side, although steel scrap recycling and processing gradually recovered after the Lantern Festival, the total volume of circulating resources in the market remained tight, and steel scrap arrivals at steel mills failed to reach expected levels. Demand side, domestic EAF steel mills continued to advance production resumptions, and some EAF enterprises resumed production one after another this week. According to an SMM survey, the operating rate of 50 nationwide EAF steel mills mainly producing construction materials was 10.76% this week, up 10.76% WoW, driving an increase in steel scrap demand. Looking ahead, as recycling and processing fully recover, steel scrap supply will gradually increase, but steel mills’ restocking demand remains. Steel scrap prices are expected to fluctuate upward in the short term.
Rebar: Early-Stage Demand Release Was Slow, Producers Operated Relatively Cautiously
This week, rebar prices consolidated, with the nationwide average price at 3,133 yuan/mt, down 2 yuan/mt WoW from last Friday. Supply side, some blast furnace mills that had previously undergone maintenance resumed normal production in March, and as their product mix advantages were not as strong as before, some hot metal flowed back to construction materials; planned daily output of construction materials in March continued to increase. Meanwhile, short-process steel mills resumed production one after another this week, and the operating rate will continue to rebound next week, with production gradually rising to normal levels later on. Demand side, end-user construction sites resumed work one after another after the Lantern Festival, but purchasing speed had not fully recovered yet, and some regions were affected by rainy weather, resulting in a relatively slow pace of demand release in the early stage overall. Inventory side, although total inventory volume was still higher than the level in the same period of last lunar year, the pace of inventory buildup this week slowed relatively on a YoY basis, and producers still felt inventory pressure was relatively manageable. Looking ahead, macro tailwinds were released during the Two Sessions, but their boost to market sentiment was limited. In addition, affected by overseas geopolitical conflicts, producers operated relatively cautiously, making it difficult for spot prices to rise. Prices are expected to remain in the doldrums.
HRC: Market Demand Fell Short of Expectations, Prices Still Had Downside Room
This week, HRC prices fluctuated, the market gradually recovered, and overall transactions improved WoW. In terms of supply, maintenance increased this week, and hot-rolled production at steel mills declined. Demand side, market demand continued to recover this week, but fell short of expectations; fundamentals showed no clear improvement for now, and overall market sentiment saw no significant fluctuations. Inventory side, hot-rolled coil social inventory at 86 warehouses nationwide (large sample) tracked by SMM totaled 5.6121 million mt this week, up 234,600 mt MoM (4.36% MoM) and up 26.06% YoY on a lunar-calendar basis; nationwide social inventory continued to build. Cost side, coke prices fell this week, but iron ore rose slightly, leaving cost support for hot-rolled coil only slightly weaker. Looking ahead, hot-rolled coil fundamentals remained weak and cost support was also insufficient. If the demand recovery continues to fall short of expectations and the macro environment provides no further positives, hot-rolled coil prices will still have downside room. Therefore, the most-traded hot-rolled coil contract is expected to trade in the 3,170-3,270 range next week.
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