en.Wedoany.com Reported - China's hot-rolled coil (HRC) and cold-rolled coil (CRC) market prices experienced volatile movements in May, with steel traders generally adopting a cautious stance toward the future. Li Zhongshuang, General Manager of Shanghai Ruikun Metal Materials Co., Ltd., stated that under the influence of weak demand, the HRC and CRC markets are expected to undergo volatile consolidation in the near term.
Li Zhongshuang noted that in the last week of May, HRC and CRC prices in the Shanghai market fell by 40 yuan/ton, and continued to drop by 30 yuan/ton in the first week of June. Safety rectifications at coal mines in Shanxi have pushed up prices of coking coal and coke, raising steel production costs. Combined with the arrival of the seasonal demand off-season, HRC and CRC prices are unlikely to see significant increases in the short term. In terms of market transactions, trading sentiment for HRC and CRC remained subdued, with end-users primarily purchasing on a need-to-buy basis. Steel traders faced sluggish sales, and some merchants accepted customer negotiations on pricing, leading to further easing of steel transaction prices.
From the demand side, the increase in hot and rainy weather has significantly weakened end-user demand. Recently, production and sales in manufacturing sectors such as home appliances and automobiles, which consume large amounts of HRC and CRC, have declined. A production scheduling report for China's three major white goods released by an industry agency shows that in June, the total scheduled production of air conditioners, refrigerators, and washing machines is 30.04 million units, down 11.8% from actual production in the same period last year. Among them, air conditioner production is scheduled at 15.23 million units, down 18.9% year-on-year; refrigerator production at 7.83 million units, down 4.1% year-on-year; and washing machine production at 6.98 million units, down 1.9% year-on-year. Automobile sales are also declining. From May 1 to 24, retail sales of passenger cars nationwide reached 989,000 units, down 24% year-on-year but up 10% month-on-month; cumulative retail sales since the beginning of the year totaled 6.594 million units, down 19% year-on-year. Li Zhongshuang pointed out that the decline in production and sales of automobiles and home appliances has reduced demand for HRC and CRC, lacking effective support for price increases.
On the supply side, the strong supply pattern in the HRC and CRC markets has not changed. Some steel enterprises have adjusted production schedules due to thin profit margins, but overall HRC production remains at a high level, with steel inventories piling up. As of the end of May, social inventories of HRC across 35 major markets nationwide stood at 3.4012 million tons, an increase of 73,600 tons week-on-week, or 2.21%. Both mill inventories and social inventories of CRC remain at high levels. Li Zhongshuang believes that this strong supply pattern largely determines that HRC and CRC prices are likely to experience volatile declines in the later period.
On the cost side, support from raw materials and fuels for steel prices remains strong recently. In May, raw material and fuel prices showed divergent trends: average iron ore prices rose; coke prices completed two rounds of price hikes; scrap steel prices fluctuated steadily but with a decline in average prices. The rise in iron ore and coke prices has pushed up the average monthly steel production cost level. Entering June, the raw material and fuel market is expected to feature "iron ore under high pressure, coke firm at high levels, and scrap steel fluctuating slightly," with overall steel production costs operating at high levels with volatility, and cost-side support for steel prices remaining resilient.
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