Ferrous Metals Maintain Fluctuating Trend in the Short Term [SMM Steel Industry Chain Weekly Report]

Forecast for Next Week: Ferrous Metals to Maintain Fluctuating Trend in the Short Term

This week, ferrous metals retreated after a rapid rise, moving sideways overall, with coking coal and coke seeing a more notable pullback. In the first half of the week, market rumors that a thermal coal supply assurance meeting would be held on Friday, combined with a sharp pullback in raw materials driven by industrial capital outflows, led to an overall pullback in ferrous metals. In the second half of the week, Trump's visit to China and trade negotiations proceeded simultaneously, but futures had largely priced this in earlier, with no significant fluctuations. Data on the five major steel products were released, showing divergence in supply, broad-based increases in demand, and solid inventory destocking. Spot market side, spot cargo prices were held firm, with market transactions mostly at lower prices. When the spot-futures price spread widened, spot-futures traders were seen making shipments.

In the short term, according to SMM survey tracking, daily average hot metal output fell 3,900 mt WoW this week. However, after the latter part of the month, earlier maintenance shutdowns will successively resume production, and hot metal output still has a trend of rebounding from low levels. Currently, the third round of coke price increases has been implemented, and combined with increased Mongolian coal supply, upside at high levels is limited, and cost support has relatively weakened. Steel side, inventory will continue destocking, with no obvious short-term contradictions, and elevated prices outside China continue to provide support. Overall, ferrous metals are expected to remain consolidating at current levels in the short term, with attention on cost-side disruptions.

Iron Ore: Macro Drivers Weakening, Demand Providing Bottom Support, Ore Prices Expected to Move Sideways with Slight Weakness Next Week

Iron ore prices showed a retreat-after-rapid-rise pattern this week. At the beginning of the week, buoyed by macro tailwinds such as expectations around US President Trump's visit to China, futures prices once rose to their intra-year high. Subsequently, as market sentiment was digested and bulls actively reduced positions, futures pulled back under pressure. Looking ahead to next week, the current round of weather disruptions has largely ended, and global iron ore shipments are expected to rebound. Combined with previously relatively high shipment volumes, port arrivals are expected to edge up WoW. Demand side, based on SMM blast furnace maintenance data estimates, hot metal production may see a marginal decline next week. However, end-use demand performed well and steel mill profits remained at favorable levels, so rigid demand for iron ore will continue to provide some support for ore prices. Overall, as macro drivers further weaken, upward momentum in futures is insufficient.Ore prices are expected to move sideways with a slightly weaker bias amid the tug-of-war between longs and shorts.

Coke: Supply-Demand Structure Maintains Tight Balance, Market May Be Generally Stable with Slight Rise Next Week

In terms of supply, coking enterprises operated relatively actively, coke supply edged up, coking enterprises had smooth shipments, and their own coke inventory remained at relatively low levels. Demand side, current steel mill profits were moderate, steel mills maintained high production enthusiasm, and some steel mills with lower coke inventory urged deliveries. However, most steel mills' coke inventory had returned to reasonable levels, with purchasing as needed being the main approach. Coking coal side, a few mines had production limited due to safety inspections, but most mines maintained stable production. Currently, transactions for high-priced coal grades remained sluggish, with some grades seeing failed auctions, suppressing the upward momentum. Going forward, mine-side pricing is expected to remain largely stable. In summary, the coke supply-demand structure maintained a tight balance, and the coke market is expected to hold up well next week with a generally stable with slight rise trend.

Steel Scrap: Both Supply and Demand Weak, Short-term Prices to Move Sideways

Supply side, recently the difficulty of purchasing at the steel scrap recycling end increased, traders gradually adopted a hold back from selling mentality, and social inventory continued to operate at low levels; demand side, currently blast furnace steel mills maintained stable rigid demand with marginal improvement in willingness to use scrap, but EAF steel mills were dragged down by mediocre finished product transactions and limited profit margins, with procurement mostly focused on restocking on an as-needed basis. Overall, the current tight supply pattern continued to support the price floor, but weak demand and pressure on finished product price trends will also suppress its upside room, therefore short-term steel scrap prices are expected to continue to move sideways.

Rebar: Some Markets See Specification Shortages, Floor Prices Have Support

This week, rebar prices first rose then fell, with the current nationwide average price at 3,275 yuan/mt, up 1 yuan/mt WoW from last Friday. Supply side, recently blast furnace steel mill rebar production lines mostly maintained their existing production pace, while some steel mills in north China had new wire rod rolling line maintenance or shutdowns, with wire rod production slightly declining; EAF steel mills saw slight improvement in per-mt comprehensive profitability, with slightly increased operating hours, but basically maintained production during off-peak electricity periods. Additionally, the difficulty of collecting scrap persisted, and future electric furnace production volume growth may be relatively limited. Demand side, recently some project demand in the north still saw phased release, but east China and central regions were slightly affected by rainy weather, with construction progress slowing down, and overall demand performance was largely unchanged WoW. Inventory side, mill inventory and social inventory continued to decline, with destocking speed accelerating, and producers faced relatively small inventory pressure. According to market sources, the market currently held similar views on the short-term outlook, indicating that prices were in a pullback phase from highs, with some traders quietly cutting prices to move ahead, and some project demand being delivered in advance, which may affect demand continuity going forward. Looking ahead, raw material trends remained firm, cost support persisted, coupled with no supply-demand imbalance for now, and some markets experienced specification shortages, providing strong support for floor prices. However, market sentiment was currently divided, with some traders accelerating profit-taking, so there remained phased pullback pressure. But going forward, supply-demand imbalance is relatively small, and demand before the June farming season and plum rainy season still has phased release potential, therefore there is still the possibility of stopping falling and rebounding later.

Hot-rolled Coil: Supply-demand Imbalance Easing, Prices Expected to Strengthen Next Week

This week, hot-rolled coil prices fluctuated downward, with weekly average prices edging lower and overall transactions deteriorating. In terms of supply, rolling line maintenance increased this week, and overall HRC production edged down. Demand side, downstream enterprises resumed work and restocked this week, traders showed higher purchasing enthusiasm, and meanwhile macro sentiment and raw material costs were both strong, driving apparent demand to warm up. Inventory side, SMM's statistics of 86 warehouses nationwide (large sample) showed HRC social inventory at 4.7134 million mt this week, down 155,100 mt WoW, down 3.19% WoW. By region, inventory in northeast, north, and east China markets declined notably, central China market inventory decreased slightly, and south China market saw inventory buildup. Cost side, average ore prices edged down slightly, the third round of coke price increase was implemented, and HRC cost support strengthened slightly. Looking ahead, HRC supply-demand imbalance eased, cost support remained, and some fear-of-heights sentiment was released this week. HRC prices may still strengthen next week. In summary, the most-traded HRC contract is expected to trade in the range of 3400-3490 next week.

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