Analysis of hot and cold rolled coil prices in the coming months

As we enter June, the domestic market for hot and cold rolled coils remains stagnant, with trading activity showing little improvement. Currently, most traders are adopting a cautious outlook towards the future market trends.

Recent Price Trends:

In early June, the Shanghai market saw significant price declines. The price of hot rolled coil Q235B dropped by 70 RMB/ton, while hot rolled coil SPHC fell by 100 RMB/ton. Experts believe that given the substantial recent price drops, hot rolled coil prices are likely to stabilize in the short term. Concurrently, cold rolled coil prices in Shanghai decreased by 30 RMB/ton. Given the relatively ample supply of cold rolled products, the market is expected to undergo a period of consolidation in the short term.

Haihao Group

Haihao Group

Supply and Demand Analysis:

Demand Perspective:

Recent improvements in downstream industries have provided a glimmer of hope for the market. In the home appliance sector, production is showing double-digit growth. In June, the total production of air conditioners, refrigerators, and washing machines reached 35.57 million units, up 13.2% year-on-year. Domestic sales hit 20.16 million units, a 4.9% increase, while export production reached 15.41 million units, up 17.1% year-on-year.

The automotive sector also shows positive trends. According to the China Passenger Car Association, retail sales in the passenger car market reached 1.685 million units in May, a 10% increase from April. Year-to-date, retail sales amounted to 8.052 million units, a 5% year-on-year increase.

Additionally, exports of home appliances and automobiles are on the rise. Data from the General Administration of Customs shows that China exported 41.0214 million home appliances in May. Year-to-date exports reached 173.8349 million units, a 24.6% year-on-year increase. Automobile exports have also achieved double-digit growth since the beginning of the year, driven by global market demand for Chinese electric vehicles.

The increased production and sales in the automotive and home appliance sectors are expected to boost the demand for hot and cold rolled coils, supporting the stabilization and potential rebound of their prices.

Supply Perspective:

On the supply side, steel manufacturers are actively reducing production, which has led to a decrease in steel output. According to the China Iron and Steel Association, key steel enterprises produced 23.94 million tons of crude steel in late May, with an average daily production of 2.1764 million tons, down 1.49% from the previous period. Meanwhile, steel inventory levels are also declining. As of late May, the steel inventory of key enterprises was approximately 14.5669 million tons, down 2.2595 million tons or 13.43% from the previous period, and down 1.3141 million tons or 8.27% from the same period in April. Compared to the same period last year, the inventory was down 1.0538 million tons, a decrease of 6.75%.

Given these trends, the supply of hot and cold rolled coils in the market is unlikely to see significant growth and may further decrease. This reduction in supply is beneficial for alleviating the supply-demand imbalance in the market, thereby preventing further price declines.

The combined factors of improving demand in key industries and reduced steel production point towards a potential stabilization and rebound in hot and cold rolled coil prices. As downstream industries like automotive and home appliances continue to ramp up production and sales, and with steel manufacturers cutting back on output, the market dynamics for hot and cold rolled coils are expected to improve, providing a more optimistic outlook for the coming months.