On June 18th, spot steel market prices experienced a slight decline, while the main futures contracts for key varieties saw a broad-based drop. Specifically, rebar fell by 0.95%, hot-rolled coil by 0.77%, iron ore by 0.13%, coke by 3.00%, and coking coal by a significant 5.78%.
Steel futures faced downward pressure today. Despite a week-on-week recovery in apparent demand for the five major steel products, supply remains elevated. The improvement in the steel supply-demand balance is limited. Coupled with a weakening sentiment in the coal and coke sector leading to a loosening of cost support, the overall market mood remains sluggish, casting uncertainty on post-holiday steel price movements.
Analysis of Bullish and Bearish Factors
1. Resumption of Production at a Coal Mine in Changzhi, Qinyuan County
A high-sulfur primary coking coal mine in Qinyuan County, Changzhi, with a rated annual capacity of 1.5 million tonnes, has resumed production. Current output has recovered to 40% of pre-suspension levels, with a sales price of 1,800 yuan per tonne. The suspension period impacted raw coal production by approximately 125,000 tonnes. It is anticipated that the resumption progress of other mines in the region will be faster than expected, leading to a gradual improvement in regional coking coal supply. Additionally, another mine is scheduled to resume operations tonight or tomorrow (June 19th). Currently, renewed expectations for mine restarts have led to significant declines in coking coal and coke futures. This has subsequently dragged down other ferrous products like rebar, hot-rolled coil, and iron ore, exerting downward pressure on steel prices.
2. Continuation of "National Subsidies": An Additional 62.5 Billion Yuan to be Allocated Before End of June
On June 18th, the National Development and Reform Commission (NDRC) held its June press conference. Spokesperson Li Chao stated that the third batch of subsidies for consumer goods trade-ins, totaling 62.5 billion yuan, will be allocated before the end of June. Simultaneously, the annual list of equipment renewal projects worth 2000 billion yuan will be finalized. Subsequent efforts will focus on three areas to ensure policy implementation: first, timely and full allocation of funds; second, comprehensive chain supervision to strictly combat practices like price hikes before subsidies or fraudulent subsidy claims; third, conducting effectiveness assessments and planning follow-up policies in advance to ensure subsidy benefits directly reach the public and unleash the potential of the equipment renewal and consumer goods trade-in policies. Currently, the accelerated deployment of subsidies for these two initiatives is expected to boost steel demand expectations in the manufacturing sector, providing a supportive factor for steel prices.
3. The Federal Reserve Maintains Rates Unchanged for the Fourth Time This Year, Hints at Potential Rate Hike
The U.S. Federal Reserve announced on the 17th that it will maintain the target range for the federal funds rate at 3.5% to 3.75%. This marks the fourth consecutive decision this year to keep rates steady, aligning with broad market expectations. The economic projections summary released by the Fed simultaneously showed that the median forecast of Fed officials for the federal funds rate in 2026 was raised to 3.8% from the 3.4% projected in March. This suggests that Fed officials anticipate implementing a rate hike operation within the year. Currently, the Fed's decision to hold rates while signaling a hawkish stance on potential hikes is strengthening the U.S. dollar. Expectations for tighter market liquidity are heating up, which poses a negative factor for steel price trends.
Today's Steel Market Performance
Spot Market
The domestic steel spot market saw a slight decline today, with average trading activity.
Futures Main Contracts
In the futures market, as of the close, the main contracts for all varieties closed lower across the board.
Steel Mill Price Adjustments
According to incomplete statistics, three steel mills adjusted their construction material ex-factory prices today:
1. Yaxin: Prices for rebar, wire rod, and coiled rod were lowered by 20 yuan/tonne.
2. Donghua: Wire rod prices were lowered by 10 yuan/tonne.
3. Yutian Jinzhou: Wire rod prices were lowered by 10 yuan/tonne.
All the above adjustments include tax.
Raw Material Spot Market
Imported Iron Ore Today
Market prices for mainstream imported iron ore varieties were slightly lower compared to the previous trading day. On the supply side, shipments from Australia and Brazil decreased week-on-week, and domestic port arrivals saw a minor decline. On the demand side, daily hot metal output increased slightly, but steel mill profit margins continued to fall. Regarding inventory, imported ore stocks increased week-on-week, continuing the accumulation trend. Overall, fundamental market support is insufficient, and it is expected that iron ore prices will remain stable with a weak bias post-holiday.
Coke Today
Coke prices remained stable today. On the supply side, production enthusiasm among coking plants improved following profit recovery. On the demand side, blast furnace operating rates at steel mills remained high, with hot metal output at 2.4086 million tonnes, indicating high daily coke consumption. Overall, while the eighth round of price increase plans is scheduled for execution on the 20th and rigid demand support persists, narrowing steel mill profits constrain the upside potential. It is expected that coke market prices will remain stable post-holiday.
Scrap Steel Today
Scrap steel prices were stable to slightly lower, with fluctuations within 10-20 yuan. The balance between scrap arrivals and consumption remains tight, continuing the seasonal pattern of weak supply and demand. Following the implementation of coke price hikes, molten iron costs have risen, slightly improving the cost-effectiveness of scrap steel, though steel mill profits remain under pressure. While there is some cost-side support, weak end-user demand continues to constrain scrap steel prices. It is expected that scrap steel prices will remain weak and stable post-holiday.
Steel Billet Today
Tangshan Qian'an ordinary square billet resources were quoted ex-factory at 3,020 yuan/tonne, including tax. National steel billet prices declined. Rebar futures oscillated with a weak bias, downstream finished product prices fell, and trading was poor. It is expected that steel billet prices will remain stable with a weak bias post-holiday.
Market Outlook
The ferrous sector weakened across the board today, with spot prices edging lower. From a fundamental perspective, apparent demand for the five major steel products recovered week-on-week this week, but the increase was limited. Supply remains high, off-season characteristics are pronounced, and inventory reduction remains challenging. On the macro front, domestic policies like trade-in subsidies are supporting long-term demand expectations. However, the Fed's decision to hold rates while adopting a hawkish tone has strengthened the U.S. dollar, and expectations for tighter market liquidity are rising. Regarding raw materials, expectations of looser coal and coke supply are dominating the market, leading to sharp declines in both coke and coking coal and dragging down other ferrous products. Cost support has significantly weakened. Overall, policy support is struggling to offset pressure from raw materials and the supply-demand balance. It is expected that steel prices next week will be weak initially before potentially strengthening, with fluctuations in the range of 0-20 yuan.
Comments