The ferrous metals complex saw mixed trading signals this morning, with steel prices hovering at elevated levels on the back of firm raw material costs. International crude oil prices surged significantly after the US launched a fresh round of strikes against Iran, with New York light sweet crude closing up 5.20% at $90.22 per barrel and Brent crude rising 4.60% to $94.65 per barrel.
On the macroeconomic front, China's manufacturing purchasing managers' index (PMI) came in at 49.8% for August, up 0.6 percentage points from the previous month. Meanwhile, data from a property research institute showed that total sales among the top 100 real estate developers from January to August 2026 reached RMB 2.01759 trillion, with the year-on-year decline widening by 0.3 percentage points compared to the January-July period. The property market remains in its traditional off-season, although core cities still see some support from quality project launches.
In the coking coal segment, major coke producers initiated a fourth round of price increases on September 1st, with wet-quenched coke rising RMB 100 per tonne and dry-quenched coke climbing RMB 110 per tonne. Several steel mills in Hebei and Tianjin have already accepted the hikes. On the same day, the average production cost for 76 independent electric arc furnace steel mills stood at RMB 3,312 per tonne, up RMB 11 from the previous reading, with average losses of RMB 81 per tonne and peak-valley electricity profit at RMB 19 per tonne.
Market activity data showed that iron ore transactions at major Chinese ports reached 1.218 million tonnes on September 1st, up 45.35% from the previous day, while construction steel transactions among 237 mainstream traders fell 25.05% to 82,100 tonnes. Over the past week, the blast furnace operating rate across 247 steel mills declined 0.48 percentage points to 82.32%, with capacity utilization easing 0.41 percentage points to 88.84%. Daily hot metal output fell 10,800 tonnes to 2.366 million tonnes, while the mill profitability rate held steady at 32.47%.
For the five major steel products, weekly supply dropped 100,700 tonnes to 7.9176 million tonnes, a decline of 1.3%, while total inventory fell 183,400 tonnes to 15.9146 million tonnes, down 1.1%. Apparent consumption stood at 8.101 million tonnes, down 1.3% week-on-week.
Rebar: Last week saw modest declines in production and inventories alongside slightly softer demand. The market is now in the transitional window between off-season and peak season, with mills maintaining low production levels. Capital is positioning ahead of the traditional September demand recovery, driving expectations-led trading. Futures have been supported by rising coke and coal costs combined with the "golden September" demand outlook, though the rally has shown signs of cooling as spot demand has yet to fully materialize, causing some long positions to retreat. Raw material costs continue to provide a floor, and mill production cuts offer additional support, but weak end-user demand caps upside, requiring sustained validation of the seasonal recovery.
Hot-rolled coils: Production fell 39,700 tonnes last week to 2.8827 million tonnes, with total inventory edging down 1,700 tonnes to 4.3755 million tonnes. Apparent demand declined 48,600 tonnes to 2.8844 million tonnes. With the fourth round of coke price hikes underway, the market is being driven by rising coal and coke costs along with seasonal demand expectations, suggesting prices will likely maintain a high-level consolidation pattern in the near term. In terms of strategy, the rebar contract for October 2026 is expected to trade within a RMB 3,050-3,170 per tonne range, while the January 2027 contract is seen in the RMB 3,100-3,200 range. For hot-rolled coils, the October 2026 contract is expected to stay between RMB 3,300-3,420 per tonne, with the January 2027 contract ranging from RMB 3,300-3,450 per tonne.
Ferroalloys: Attention continues to focus on the upward trajectory of production costs. The market has seen a rotation between long and short positions, with bulls currently holding the advantage and prices continuing to advance. Steel mill demand remains broadly stable, though profitability remains under pressure. Whether end-user demand can sustain its improvement will be the key determinant for potential further load reductions at mills. With steel prices strengthening, downstream absorption capacity requires close monitoring. Ferrosilicon output saw modest increases with rising factory inventories, while silicon manganese production also rose, though inventory pressure at plants remains elevated. Attention should be paid to hedging intentions from high-inventory producers following sustained price gains. Cost-side dynamics remain firm, with a fourth round of coke price increases underway and manganese ore prices edging up. Overall, alloy prices are well-supported and likely to maintain a firm-to-strong tone in the near term, though the sustainability of demand realization and upstream hedging activity warrant close observation following the recent price appreciation. For reference, the ferrosilicon contract for November is seen in the RMB 6,000-6,400 per tonne range, with silicon manganese November contracts between RMB 6,000-6,300 per tonne. As for strategy, earlier long positions may consider taking partial profits while retaining the remainder.
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