Analysis of future cold and hot rolled coil prices
In June, the domestic market for cold and hot rolled coils exhibited signs of weakness, with a decline in demand and fluctuating steel prices. For instance, in the Shanghai market, the price of 1.0 mm cold rolled steel (ST12) from Ansteel dropped from 4380 RMB/ton at the beginning of the month to 4190 RMB/ton by the end, a decrease of 190 RMB/ton. Similarly, the price of 5.5-11.75 mm × 1500 mm × C hot rolled steel (Q235B) from Shougang and Ansteel decreased from 3830 RMB/ton to 3720 RMB/ton, a reduction of 110 RMB/ton.
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Market Conditions in June
Throughout June, traders reported sluggish sales and difficulties in moving inventory. This was primarily due to weak downstream demand, leading to limited purchasing interest among end-users. To facilitate sales, some traders resorted to accepting negotiated prices, resulting in both overt and covert price drops.
Weather Impact
Weather conditions played a significant role in influencing the recent market trends. Persistent rainy weather in southern regions, coupled with a bearish sentiment in the futures market, contributed to the decline in spot steel prices. The current scenario of “weak demand, low prices” has been fully reflected in the market. As weather conditions improve, a rebound in steel prices is anticipated.
Short-Term Outlook
Industry experts predict that the prices of cold and hot rolled coils will stabilize in the short term, based on several factors:
Improved Demand for Cold and Hot Rolled Coils: Recent performance in the automotive and home appliance sectors suggests a resilient demand for cold and hot rolled coils. Data from the China Passenger Car Association indicates that in mid-June, retail sales in the passenger car market reached 1.087 million units, a month-on-month increase of 2%. Wholesale sales by passenger car manufacturers totaled 1.169 million units, up 11% month-on-month. Sales of new energy vehicles also showed robust growth, with retail sales reaching 534,000 units, a 7% increase month-on-month. Since the beginning of the year, retail sales in the passenger car market have totaled 9.16 million units, a 3% year-on-year increase, while wholesale sales have reached 10.753 million units, a 6% increase. Sales of new energy vehicles have reached 3.789 million units, a 32% increase year-on-year.
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In the home appliance sector, production levels have generally increased. According to recent industry reports, the combined production of air conditioners, refrigerators, and washing machines in July is expected to reach 30.34 million units, a 0.5% increase compared to the same period last year. Specifically, air conditioner production is projected to reach 16.53 million units (a 0.4% increase), refrigerator production 7.7 million units (a 1.7% increase), and washing machine production 6.11 million units (a 0.8% decrease). This anticipated increase in demand from the automotive and home appliance sectors in July will help stabilize cold and hot rolled coil prices.
Limited Increase in Supply: The supply of cold and hot rolled coils is expected to remain limited, which will help alleviate supply-demand imbalances. Due to the previous decline in steel prices, many steel enterprises have seen a significant contraction in profits, with some entering a state of loss. According to the National Bureau of Statistics, the steel industry’s losses narrowed to 12.72 billion RMB in the first five months of this year. This has led to increased production restrictions among steel enterprises. Data from the China Iron and Steel Association indicates that in mid-June, the average daily crude steel output of key steel enterprises was 2.1851 million tons, a decrease of 2.81% from the previous ten-day period and a 3.43% year-on-year decline. With reduced steel production, the market will see limited additional supply, which is expected to support the stabilization of cold and hot rolled coil prices.
Strong Cost Support: The high prices of raw materials like iron ore, coke, and scrap steel continue to support steel prices. At the end of June, the domestic coke market saw a new round of price increases, with coke prices rising by 50-55 RMB/ton. Coal prices also saw slight increases, and scrap steel prices rose steadily, with heavy scrap prices in Tangshan, Hebei, increasing by 10 RMB/ton, and in Zhangjiagang, Jiangsu, by 20 RMB/ton. With the high cost of raw materials, steel enterprises face significant cost pressures, leading them to maintain higher steel ex-factory prices. This makes a significant drop in cold and hot rolled coil prices unlikely in the near future.
While the cold and hot rolled coil markets faced challenges in June, there are strong indicators that prices will stabilize in the short term. Improved demand from key industries, limited supply increases, and strong cost support are all contributing factors. As market conditions evolve, stakeholders can anticipate a more stable pricing environment for cold and hot rolled coils.