Forecast for Next Week:Steel Inventory Starts to Build Up for Chinese New Year, Steel Prices Expected to Have Limited Fluctuation Before the Holiday
This week, the ferrous metals series fluctuated downward, and bearish sentiment in the market further intensified. On the news front, the State Council Information Office held a regular policy briefing on January 8 to introduce the expansion and implementation of the "program of large-scale equipment upgrades and consumer goods trade-ins" policies. Relevant departments stated that in 2025, the implementation of these policies will be expanded, with a focus on advancing the "four major actions," including expanding support for consumer goods trade-ins and accelerating equipment upgrades. According to the National Bureau of Statistics (NBS), China's CPI rose 0.1% YoY in December, while PPI fell 2.3% YoY. Mid-week, the sixth round of coke price cuts was implemented, and steel mills successively announced winter stockpiling policies. According to an SMM survey, traders' overall willingness for winter stockpiling this year was relatively low, with most adopting a wait-and-see attitude. In the spot market, as the Chinese New Year holiday approaches and prices continue to decline, spot transactions further weakened.
In the short term, as US President Trump is about to take office, external risks are gradually increasing. In terms of the industry, previously overhauled blast furnaces are gradually resuming production, and pig iron production is expected to maintain an upward trend. Steel demand is seasonally declining, and the inventory of the five major steel products has entered the Chinese New Year inventory buildup cycle. Fundamental imbalances are slowly accumulating, and steel prices are expected to have limited fluctuation before the holiday. The recent rapid decline has partially released pessimistic sentiment, and prices may see a slight rebound next week.
Iron Ore: Pessimistic Expectations vs. Pre-Holiday Restocking, Iron Ore Prices Expected to Fluctuate Rangebound Next Week
For imported ore: Global shipments of imported ore are expected to remain at a medium-to-high level. However, due to the high global shipments of iron ore in December, port arrivals are expected to increase slightly. On the demand side, according to SMM's blast furnace maintenance data, the number of blast furnaces resuming production next week is expected to exceed those under maintenance, leading to a continued rebound in pig iron production. Additionally, with three weeks remaining before the Chinese New Year, steel mills are more actively restocking, boosting overall demand for iron ore and providing strong support for spot prices. Iron ore prices are expected to continue fluctuating rangebound next week.
For domestic ore: Domestic iron ore concentrate resources remain relatively tight, providing some support for domestic concentrate prices. However, steel mills currently have a strong desire to bargain down prices. Coupled with the recent weak performance of iron ore futures, domestic iron ore concentrate prices are expected to fluctuate downward next week.
Coke: Supply and Demand Fundamentals Remain Loose, Coke Market Expected to Be Stable with a Weak Trend Next Week
Key Insights:In terms of supply, coke production remains stable, with average shipment conditions. Only a few coke producers have reduced production due to environmental protection factors. On the demand side, as the year-end approaches, steel mills are successively announcing winter stockpiling policies. However, expectations remain low, and the negative feedback trend continues, with steel mills showing a strong desire to seek profits from raw materials. Regarding raw material fundamentals, year-end safety inspections are becoming stricter, and some coal mines are planning to suspend operations starting mid-month. Coking coal supply is expected to decrease before the Chinese New Year. However, coal mine inventories remain at high levels, and online auction prices are mostly declining. Downstream restocking willingness is low, and coking coal prices are expected to remain stable with a weak trend in the short term. In summary, raw materials still have some room for price declines, and finished steel prices have seen significant downward adjustments. A round of price negotiations for coke may occur before the Chinese New Year.
Rebar:Limited Effective Sales Period, Spot Prices Gradually Stabilizing
This week, construction steel spot prices fluctuated downward. As prices weakened, market trading activity decreased, and overall transaction volumes shrank. On the supply side, the number of new maintenance projects at blast furnace steel mills decreased this week, with some mills resuming production after year-end holidays. Meanwhile, some EAF steel mills have already suspended production for maintenance, with further maintenance concentrated between January 10-20. Construction steel supply continued to decline this week, but the demand decline was even more pronounced, leading to continued inventory buildup. Looking ahead, as the Chinese New Year approaches, the market's effective sales period is limited, and end-use demand will continue to decline. Due to weak winter stockpiling willingness among traders, overall trading activity is gradually decreasing, and the pace of inventory buildup may accelerate. However, spot prices are expected to stabilize, and the RB2505 contract is expected to fluctuate within the range of 3,150-3,300 next week.
HRC: Bearish Sentiment Partially Eased, HRC Prices Expected to Stabilize Next Week
This week, HRC futures and spot prices both fell by nearly 100 yuan. In terms of fundamentals, HRC production increased by 98,600 mt WoW this week, significantly increasing supply pressure. Weak futures performance, coupled with the year-end approaching, dampened end-user winter stockpiling willingness and purchasing enthusiasm. Overall, social inventory began to build up, while traders showed weak purchasing willingness, leading to an increase in in-plant inventory. As a result, total inventory reached 4.219 million mt, up 67,800 mt WoW. Looking ahead, previously overhauled steel mills are gradually resuming production, and SMM surveys indicate that HRC production will increase MoM in January. Meanwhile, some end-users will begin their holidays after this week, leading to further weakening demand and continued inventory buildup risks. On the raw material side, according to SMM tracking, pig iron prices rebounded slightly in the short term, but cost support remains limited. Overall, domestic macroeconomic conditions remain in a vacuum period, and fundamental imbalances are beginning to accumulate. However, the extent and duration of these imbalances remain within expectations. Overseas bearish macro sentiment has partially eased this week, so prices are expected to stabilize, and the HC2505 contract is expected to fluctuate within the range of 3,260-3,360 next week.
Steel Scrap: Futures Market Continues to Weaken, Steel Scrap Prices Decline
This week, rebar futures and spot prices weakened significantly, narrowing steel mill profits and reducing production willingness. Steel mills lowered prices accordingly, with mainstream steel mills reducing steel scrap prices by 18-160 yuan. Amid weakening market prices, steel scrap producers lacked confidence and opted to sell actively to avoid further price declines. Steel mills reported good arrivals overall. Looking ahead, as the Chinese New Year holiday approaches, finished steel demand is declining. Coupled with the implementation of the sixth round of coke price cuts, pig iron costs have decreased, further reducing the cost-effectiveness of steel scrap. With insufficient demand support, steel scrap prices are expected to continue fluctuating downward. However, considering the approaching Chinese New Year, steel scrap recycling and transportation may be affected, reducing supply and liquidity in the steel scrap market. As a result, price declines are expected to be relatively limited, and steel scrap prices are expected to fluctuate rangebound in the short term, with a range of (-50, 50) yuan/mt.
1. For data mentioned in the report, please visit the SMM database (https://data-pro.smm.cn/)
2. For more SMM steel information, analysis reports, and database content, please contact Li Ping from the SMM Steel Division at 021-51595782.
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