Steel: Cost support strengthens significantly, steel prices to fluctuate at low levels

For rebar, national output fell by 72,500 tons week-on-week to 1.8255 million tons, a decrease of 379,000 tons year-on-year. Social inventories dropped by 53,800 tons to 5.1415 million tons, up 992,100 tons year-on-year. Mill inventories decreased by 63,800 tons to 1.8448 million tons, an increase of 122,200 tons year-on-year. Apparent demand for rebar rose by 158,300 tons week-on-week to 1.9431 million tons, up 43,700 tons year-on-year. Rebar production continued to decline, inventories shifted from an increase to a decrease, and demand rebounded, with supply-demand data performing better than expected. However, reports indicate that typhoon weather affected transportation and port operations in some regions, increasing in-transit resources, which may lead to higher arrivals next week.

According to central bank data, social financing in July increased by 1.4062 trillion yuan, up 275.5 billion yuan year-on-year. RMB loans decreased by 340 billion yuan, down 290 billion yuan year-on-year. Household long-term loans dropped by 120.2 billion yuan, a decrease of 10.2 billion yuan year-on-year. According to Mysteel data, 16 major real estate enterprises recorded total sales area of 33.7039 million square meters from January to July, down 17.9% year-on-year. July sales area totaled 3.9509 million square meters, a decline of 25.3% year-on-year and 40.6% month-on-month. Real estate sales in July saw significant declines both month-on-month and year-on-year, keeping downstream demand for rebar persistently weak. However, raw material prices have stopped falling and rebounded, with coke coal surging sharply, providing strong cost support for rebar. Coupled with the realization of production cut expectations by steel mills, market support at the bottom has strengthened. Short-term rebar prices are expected to remain in a low-level fluctuating range.

For hot-rolled coil, national output rose by 90,300 tons week-on-week to 2.9676 million tons, down 188,300 tons year-on-year. Social inventories increased by 500 tons to 3.6737 million tons, up 898,800 tons year-on-year. Mill inventories fell by 72,200 tons to 714,100 tons, down 85,700 tons year-on-year. Apparent demand for hot-rolled coil increased by 181,600 tons week-on-week to 3.0393 million tons, down 108,200 tons year-on-year. Hot-rolled coil production rebounded, inventories shifted from an increase to a decrease, and demand recovered, showing improved data performance. According to China Association of Automobile Manufacturers data, July automobile production and sales reached 2.573 million and 2.584 million units, respectively, down 6.8% and 8% month-on-month, and down 0.7% and 0.3% year-on-year. From January to July, automobile production and sales totaled 17.567 million and 17.602 million units, both down 3.7% year-on-year, with a narrower decline compared to the first half of the year. July automobile production and sales remained weak, with overall downstream demand for hot-rolled coil still at low levels. However, recent continuous increases in coke and coal prices have strengthened cost support for hot-rolled coil. Steel mills are firm in their price support intentions, with Baosteel slightly raising September flat product ex-factory prices. Short-term hot-rolled coil prices are expected to continue fluctuating at low levels.

Iron Ore: Port inventory stops rising and turns down, iron ore prices to fluctuate

On the supply side, shipments decreased this period, with global shipments at 32.012 million tons, down 1.383 million tons week-on-week. Australian shipments were 17.973 million tons, up 621,000 tons week-on-week. Brazilian shipments were 7.712 million tons, down 2.306 million tons week-on-week. Non-mainstream shipments were 6.327 million tons, up 302,000 tons week-on-week. Arrivals saw a significant decline, with arrivals at 47 ports totaling 18.914 million tons, down 13.097 million tons week-on-week. Global shipments fell slightly, and arrivals dropped sharply to a year-to-date low, leading to a certain contraction in short-term supply. On the demand side, daily hot metal output at 247 steel mills increased by 1,700 tons to 2.382 million tons, down 24,600 tons year-on-year. The blast furnace operating rate rose by 0.32 percentage points to 82.64%, and capacity utilization increased by 0.06 percentage points to 89.44%. Four new blast furnaces resumed operations, and three underwent maintenance. The profit rate of steel mills recovered, rising by 1.74 percentage points to 33.77%. Hot metal output increased slightly, steel mill losses narrowed marginally, and iron ore demand improved. On the inventory side, iron ore inventories at 47 ports stood at 174.215 million tons, down 791,800 tons week-on-week, 30.3993 million tons higher than last year. Vessels at port numbered 88, down 38 from the previous period. Imported iron ore inventories at 247 steel mills totaled 88.1127 million tons, up 383,400 tons week-on-week, 3.2507 million tons lower than last year. Port iron ore inventories stopped increasing and turned downward, with a significant reduction in vessels at port, indicating a phased release of earlier port congestion pressure. Overall, the iron ore market is experiencing phased supply-demand improvements. Global shipments have slightly declined, arrivals have fallen sharply to a year-to-date low, hot metal output has marginally rebounded, steel mill profit rates have recovered from low levels, and port inventories have stopped increasing and turned downward. With a supply reduction and demand increase pattern, short-term iron ore prices are expected to remain range-bound.

Coke and Coal: Another coal mine safety accident occurs, coking enterprises' losses intensify

For coke, this week, the price of Tianjin Grade I coke remained unchanged, while Luliang Grade I and Tangshan Grade I coke prices were flat. Rizhao Grade I coke prices rose by 90 yuan per ton. Futures prices increased, with the coke 2609 contract rising by 106.5 yuan per ton. On the supply side, raw material coking coal prices remained strong, and coking enterprises' production profit losses worsened. Current spot production losses for coking enterprises are around 110 yuan per ton. Coking plant operating enthusiasm is low, with some plants reducing loads. This week, coking plant operating rates declined. Independent coking plants' daily average output decreased by 8,200 tons, while 247 steel mills' daily coke output increased by 200 tons. Total coke production fell week-on-week. On the demand side, terminal demand rebounded slightly. This week, rebar apparent demand increased by 158,300 tons week-on-week to 1.9431 million tons, up 43,700 tons year-on-year. Steel mill blast furnace operating rates recovered. 247 steel mills' blast furnace capacity utilization rose by 0.06%, and hot metal output increased by 1,700 tons per day to 2.382 million tons per day, leading to a week-on-week increase in coke demand. On the inventory side, this week, 230 independent coking plants' inventories decreased by 108,800 tons, steel mill coke inventories fell by 52,500 tons, and coke port inventories accumulated by 50,200 tons. Total coke inventories declined by 95,800 tons. Overall, another coal mine safety production accident occurred, coking coal prices remained strong, coking enterprises' production losses expanded, leading to reduced operating loads. Some coking plants plan further load reductions. Coke production supply faces marginal decline expectations. The rebound in hot metal output provides some support for rigid coke demand, but steel mills' poor profit margins limit their ability to absorb high coke prices, leading to rigid procurement. Short-term coke prices are expected to exhibit a volatile and slightly stronger trend.

For coking coal, this week, Liulin low-sulfur primary coking coal prices rose by 33 yuan per ton, while Shanxi medium-sulfur primary coking coal prices remained unchanged. Imported Mongolian coal prices increased, with raw Mongolian #5 coal rising by 80 yuan per ton and washed Mongolian #3 coal rising by 93 yuan per ton. The coking coal 2609 futures price increased by 43 yuan per ton. On the supply side, this week, raw coal output from 523 sample mines increased by 12,100 tons, while washed coal output decreased by 4,300 tons to 631,600 tons per day. On August 14, a gas outburst accident occurred at the Yangmeishan Coal Mine in Lianyuan City, Hunan Province. Ningxia launched a comprehensive rectification campaign for mine safety production issues. The coal mine safety supervision situation remains severe, and the resumption of operations at related mines remains slow. On the import side, throughput at the China-Mongolia border ports remains high. On the demand side, coking enterprises' profit losses are expected to continue expanding. Current spot production losses for coking enterprises are around 110 yuan per ton. Coking enterprise production enthusiasm has weakened, with some plants reducing loads. Coke supply faces marginal decline, with expectations of further decreases. On the inventory side, 523 sample mines' raw coal inventories decreased by 77,600 tons, and washed coal inventories fell by 126,700 tons. Independent coking plants' coking coal inventories increased by 98,800 tons, steel mills' coking coal inventories fell by 134,800 tons, and port coking coal inventories decreased by 380,000 tons. Total coking coal inventories dropped by 499,900 tons. Overall, the safety production supervision situation is severe in other provinces besides Shanxi. Coking coal output is recovering but remains slow. The shortage of some high-quality primary coking coal remains unchanged. Coking enterprises' production losses continue to worsen, and their operating enthusiasm continues to decline. The reduction in coking plant operating rates alleviates the structural shortage pressure of coking coal. Steel mill profits remain poor, with recent restocking limited to rigid procurement. Short-term coking coal prices are expected to show a volatile and slightly stronger trend.

Scrap Steel: Rising hot metal costs enhance scrap steel cost-effectiveness

This week, scrap steel prices rose across various regions. The national scrap steel price index increased by 4.2 yuan per ton to 2,167 yuan per ton. On the supply side, daily scrap steel arrivals at steel mills decreased. Daily arrivals at 255 steel mills totaled 437,600 tons, down 26,300 tons week-on-week. The operating rate of shredding processing enterprises remained unchanged, while output and capacity utilization declined. On the demand side, scrap steel demand fell. Daily scrap steel consumption at 255 steel mills decreased by 8,900 tons to 464,100 tons. Among them, consumption at 89 short-process steel mills fell by 7,500 tons, and consumption at 132 long-process steel mills decreased by 2,300 tons. The capacity utilization rate of 49 electric arc furnace plants rose by 0.2%, while the capacity utilization rate of 89 short-process steel mills fell by 1.5%. On the profit side, losses at short-process steel mills narrowed. Losses at Jiangsu valley electricity prices were around 150 yuan per ton, while flat electricity losses were around 260 yuan per ton. On the inventory side, long-process steel mills' scrap steel inventories decreased by 12,100 tons to 2.52 million tons. Short-process steel mills' scrap steel inventories fell by 1,800 tons to 1.2 million tons. Overall, terminal demand rebounded slightly. This week, rebar apparent demand increased by 158,300 tons week-on-week to 1.9431 million tons. Steel mill capacity utilization recovered, and hot metal output increased by 1,700 tons per day to 2.382 million tons per day, boosting blast furnace demand for scrap steel. Electric furnace operating rates fell slightly, reducing short-process demand for scrap steel. Hot metal costs continue to rise, improving scrap steel cost-effectiveness. Short-term scrap steel prices are expected to trend volatile and slightly stronger.

Ferroalloys: Limited sustainability of rebound momentum

For silicon manganese, supply increased week-on-week, and inventory levels remain high, providing limited upside momentum from fundamentals. According to SteelHome data, current 6517 silicon manganese market prices across regions range from 5,650 to 5,830 yuan per ton, up 50-150 yuan per ton week-on-week. In news, the mainstream steel tender final price was set at 5,880 yuan per ton, up 80 yuan per ton from the inquiry price, but down 70 yuan per ton month-on-month. On the cost side, port manganese ore prices stopped falling and stabilized this week, rising by 0.1-0.2 yuan per ton-degree week-on-week. Immediate production costs for silicon manganese in the northern region remained roughly flat week-on-week, while costs in the southern region fell. Immediate production profits for silicon manganese in most major production areas increased week-on-week, and weekly silicon manganese output stopped declining and rebounded. As of the week ending August 14, weekly silicon manganese output was 160,400 tons, up 2.14% week-on-week. The operating rate of silicon manganese production enterprises in Gansu increased significantly week-on-week. On the demand side, daily hot metal output was roughly flat week-on-week this week, while rebar output fell 3.82% week-on-week. Weekly silicon manganese demand from sample steel mills fell 0.23% week-on-week to 114,000 tons, declining for three consecutive weeks to a low absolute level. On the inventory side, inventories at 63 silicon manganese sample enterprises fell slightly week-on-week to 458,000 tons as of August 14, down 5,000 tons week-on-week but up 299,200 tons year-on-year, continuously hitting new highs in recent years. Overall, as immediate production profits improve, weekly silicon manganese output has rebounded. Although sample enterprise inventories fell week-on-week, they remain high. Cost-side changes are limited. The overall fundamentals are insufficient to support sustained upward movement in silicon manganese futures prices. Short-term silicon manganese futures prices are expected to remain range-bound.

For ferrosilicon, there is a lack of new driving forces, leading to range-bound trading. According to SteelHome data, current 72 ferrosilicon ex-factory prices across regions range from 5,530 to 5,600 yuan per ton, with Inner Mongolia prices up 20 yuan per ton week-on-week. On electricity prices, July prices in Ningxia were mainly 0.39-0.41 yuan per kWh, with some at 0.44-0.46 yuan per kWh. Gansu prices were 0.42-0.45 yuan per kWh, Qinghai 0.31-0.34 yuan per kWh (some at 0.41), Inner Mongolia 0.4-0.42 yuan per kWh, and Shaanxi (non-power plant enterprises during peak avoidance) 0.49 yuan per kWh. Immediate production costs for ferrosilicon in Inner Mongolia and Qinghai increased slightly by 20-30 yuan per ton week-on-week, leading to a minor recovery in immediate production profits in most major producing areas. On the supply-demand front, operating rates of ferrosilicon production enterprises in Gansu and Qinghai increased slightly week-on-week. As of the week ending August 14, weekly ferrosilicon output rose 1.27% week-on-week to 111,900 tons. On the demand side, weekly ferrosilicon demand from sample steel mills fell 0.72% week-on-week to 18,400 tons, remaining at low levels for the past five years. Magnesium ingot output declined, with daily magnesium ingot output falling 3.09% week-on-week to 3,039 tons. On the inventory side, as of the week ending August 14, the total of ferrosilicon warrants and valid advance notice numbers stood at 4,559 lots, down 17,217 lots year-on-year. Overall, ferrosilicon supply increased slightly this week, while demand decreased marginally. Fundamentals lack new driving forces. Short-term ferrosilicon futures prices are expected to remain range-bound, with attention on the overall trend of the black commodity sector.