Forecast for Next Week: Ferrous Metals Lack Clear Upward or Downward Drivers Before the Holiday
This week, ferrous metals first declined then rose, maintaining a sideways movement overall. Early in the week, a fire accident occurred at the coal preparation plant of Shanxi Coking Coal Huozhou Coal & Electricity Jinbei Coal Industry (Shanlang Mine), with the production resumption time yet to be determined, but it provided limited impetus to the ferrous chain. Later in the week, several real estate companies stated they were no longer required to report on the "three red lines," indicating a potential relaxation of strict real estate control policies. Coupled with the fact that although the inventory of the five major steel products continued to accumulate WoW, the situation was better than in previous years, the futures market showed some recovery. In the spot market, when futures were in the doldrums, market transactions were weak. Later in the week, as the spot-futures price spread narrowed, some spot-futures purchasing activities occurred. Construction steel demand declined further, while the manufacturing sector mostly restocked as needed.
In the short term, according to the SMM survey and tracking, the daily average hot metal output decreased by 7,000 mt WoW this week, and it is expected to steadily increase next week. However, as over 80% of steel mills have completed pre-holiday restocking, the support from the raw material side is relatively neutral in the short term. For steel products, with the Chinese New Year approaching, end-use demand will gradually enter a holiday shutdown next week. The supply-demand imbalance will continue the seasonal inventory buildup pace, but the YoY pressure is limited. Overall, the ferrous chain currently lacks strong internal upward or downward drivers and may fluctuate with pre-holiday fund sentiment. Therefore, it is expected that the overall trend before the holiday may maintain a sideways movement.
Iron Ore: Pre-Holiday Stockpiling Nears Its End, Prices Expected to Consolidate at Lows Next Week
This week, iron ore prices continued their weak, fluctuating trend, with the average price slightly declining. Pre-holiday stockpiling still provided some support to ore prices this week. However, as end-use demand has entered the off-season, apparent demand is seasonally declining, and the inventory buildup pace of the five major steel products has accelerated, market sentiment is relatively pessimistic, dragging iron ore prices into a weak, fluctuating trend. Looking ahead to next week, on one hand, steel mill restocking is nearing completion; on the other hand, due to a Level 1 environmental protection alert in Hebei, some steel mills may implement blast furnace idling, making a rebound in hot metal production unlikely. Overall demand for iron ore remains weak. Additionally, with no significant macro drivers during this vacuum period, iron ore prices are expected to continue consolidating at lows next week.
Coke: Market Expectations Lean Towards Further Price Increases, Prices May Hold Up Well Next Week
Supply side, after the first round of price increases for coke was implemented, coking plant losses were mitigated, leading to improved production enthusiasm and a slight increase in coke supply. Demand side, recent snowy weather has affected road transportation, prompting some low-inventory steel mills to increase purchasing activity. However, most other steel mills already maintain coke inventories at reasonable levels and primarily purchase as needed. Regarding raw material fundamentals, recent accidents have led to production halts at some coal mines, tightening coking coal supply. While most mines operate normally, and downstream there remains some restocking expectation supporting coking coal prices, poor profitability downstream has led to cautious purchasing of high-priced coal varieties. Online auction transaction prices saw slight decreases, and market sentiment weakened somewhat. To sum up, coke costs provided strong support. After the first round of price increases was implemented, the market still held some bullish expectations. In the short term, the coke market is expected to be generally stable with slight rise.
Steel Scrap: Weak Supply and Demand, Prices Likely to Fluctuate Rangebound Next Week
On the supply side, affected by low temperatures and snowy weather in the north, the efficiency of steel scrap collection, processing, and transportation dropped significantly, and output from scrap-generating enterprises declined. On the demand side, although short-process electric furnace steel mills had production profits supporting demand resilience, some enterprises began to cut capacity and slow down their procurement pace as the Chinese New Year holiday approached. Overall, with the Chinese New Year holiday nearing, the steel scrap market will gradually enter a holiday shutdown. Prices are expected to see no wild swings next week and will likely continue to fluctuate rangebound.
Rebar: Winter Stockpiling Willingness Lower Than the Same Period in Previous Years, Supply-Demand Imbalance Relatively Small
This week, rebar prices moved in the doldrums. The current nationwide average price was 3,156 yuan/mt, down 11 yuan/mt WoW. Supply side, approaching year-end, many electric furnace mills already had production halt plans, mostly concentrated around February 6, and production will gradually decrease. Additionally, although recent profitability declined, blast furnace steel mills generally maintained slight profits and temporarily kept previous production levels. Demand side, as projects in the central and western regions wrapped up this week, the pace of demand decline will accelerate next week. Around the Little New Year, both northern and southern regions will enter a phase of complete demand stagnation. Inventory side, inventory is in a seasonal buildup phase, but the accumulation rate is slower than in previous years, resulting in relatively small inventory pressure for the same period. Reportedly, winter stockpiling sentiment in the market this year is quite cautious. Winter stockpiling in east China is basically complete, while enthusiasm in other regions is moderate, mostly involving building base positions to actively reduce risk exposure. Looking ahead, as electric furnace mills gradually halt production and demand progressively stagnates, the market faces a situation of weak supply and demand. However, compared to the same period in previous years, the inventory accumulation slope is gentler, and the supply-demand imbalance is relatively small. Currently, building materials price trends are significantly influenced by overall commodity price fluctuations and raw material costs, but recent mill raw material restocking is nearing completion, weakening the price drive from raw materials. Spot prices are expected to continue moving sideways next week, with the fluctuation range narrowing further.
Hot Rolled Coil: Year-End End-Use Demand Further Weakens, Price Support Insufficient Next Week
This week, hot rolled coil prices moved sideways, and actual transaction activity was lukewarm. Supply side, affected by incidents, hot rolling line maintenance at steel mills increased this week, and hot rolled coil production showed a slight decrease. Demand side, the impact of the off-season became more evident this week, apparent demand weakened further, downstream winter stockpiling willingness was not strong, and overall hot rolled coil demand declined. Inventory side, according to SMM's large-sample statistics, social inventory for hot rolled coil was 3.8634 million mt this week, up 59,400 mt WoW, an increase of 1.56% WoW. National social inventory continued to accumulate. By region, North China and Northeast China markets continued inventory buildup with expanding increases, while East China, South China, and Central China markets still maintained a slight destocking pace. Cost side, the first round of coke price increases was implemented on January 30, while iron ore prices remained in the doldrums due to constrained demand, providing some support on the cost side. Looking ahead, as the year-end approaches, end-use demand for finished steel weakened further, and trading volume in the spot market shrank, making it difficult to support spot prices. It is expected that the most-traded hot-rolled coil futures contract will trade in the range of 3,220-3,320 next week.
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