Cost vs. Demand: Hot-Rolled Steel Coil Market Navigates High-Level Volatility

Strong Cost Support, Mills Firm on Prices

One of the core drivers of the current market trend stems from the cost side. Prices of key raw materials, iron ore and coking coal, remain persistently high. Particularly, imported iron ore prices have stayed firm, significantly elevating smelting costs for blast-furnace (long-process) mills. Faced with these high costs, mill profit margins are severely squeezed, with some even operating near breakeven. Consequently, steel mills have a strong willingness to pass on costs through higher ex-factory prices, providing a solid floor for hot-rolled steel market prices. Several major mills have successively released new pricing policies, generally increasing the ex-factory prices for mainstream products like HRC, further solidifying market confidence.

Moderate Demand Recovery, Downstream Procurement Turns Cautious

In contrast to the heated cost side, demand performance appears more moderate and rational. While the traditional "Golden March, Silver April" peak season demand has arrived as expected, it has not led to explosive growth. Key downstream sectors such as automotive manufacturing, home appliances, and mechanical engineering show mixed performance with an overall gentle recovery. End-users are primarily purchasing on a need-to basis, adopting relatively cautious inventory strategies, with large-scale stockpiling being rare. This results in transactions maintaining a certain volume but struggling to consistently expand enough to drive prices sharply higher. Both social inventories and mill inventories are declining slowly, confirming that demand is real but not particularly strong.

Favorable Macro Policies, Medium-to-Long-Term Outlook Remains Optimistic

Despite the short-term demand not exceeding expectations, medium-to-long-term optimistic market sentiments persist. The steady stream of pro-growth economic policies from the national level, focused on promoting large-scale equipment renewals and consumer goods trade-ins, is providing a significant boost to the manufacturing sector. Furthermore, the accelerated implementation of infrastructure projects across various regions will continue to consume steel stocks. These policy benefits are expected to translate more substantially to the downstream later this year, thereby boosting demand for HRC.

Market Outlook: Volatile Operation, Monitor Key Supply-Demand Variables

In conclusion, the hot-rolled steel market is unlikely to break out of its volatile pattern in the short term. Prices are supported on the downside by costs and capped on the upside by demand strength. Market participants need to closely monitor several key variables: firstly, changes in raw material and fuel prices, which directly determine cost strength; secondly, the pace and intensity of downstream demand release, particularly the effectiveness of policy stimuli in industries like automotive and appliances; finally, the level of production capacity utilization by mills—a significant increase in supply driven by improved profitability could disrupt the current tight supply-demand balance.

It is anticipated that over the next one to two months, hot-rolled-steel prices will continue to hover around current levels, accompanied by periodic adjustments. The market is awaiting a stronger driving signal to determine its next directional move.