Steel: Cost Support Weakens, Steel Prices Fluctuate Market Analysis The rebar futures main contract closed at 3,111 yuan per ton yesterday, while the hot-rolled coil main contract settled at 3,276 yuan per ton. In the spot market, overall trading activity for steel products was relatively weak today. As futures prices declined, speculative sentiment remained poor, with some spot sales occurring at discounted prices. Downstream buyers showed some restocking interest at lower price levels. National construction materials trading volume reached 78,011 tons.
Supply, Demand, and Logic: The fundamental contradictions in construction steel are not significant, leading to insufficient momentum for price movements. Similarly, the fundamental contradictions for flat steel are limited, though persistently high inventory levels continue to suppress marginal price flexibility. Short-term market sentiment is weak. Expectations of maintenance following an accident at Baotou Steel are impacting raw material cost support. Market participants are closely monitoring production cuts, winter stockpiling activities, changes in destocking driven by demand, profit margins, cost support levels, raw material restocking, steel exports, and domestic policies.
Strategy Single Position: Volatile Inter-temporal: None Inter-product: None Futures-Spot: None Options: None
Risks Macro policies, finished steel demand conditions, steel exports, steel mill profits, and cost support.
Iron Ore: Trading Volume Increases Significantly, Ore Prices Fluctuate Market Analysis Futures and Spot: Iron ore prices showed weak and volatile movement yesterday. In the spot market, import iron ore prices in Shandong experienced minor fluctuations with limited transaction volume. On the sell side, traders showed average enthusiasm in offering; inquiries and offers in the Shandong forward market were also average, with no transactions concluded. On the buy side, steel mills maintained their routine replenishment based on immediate needs. A few mills in the region had tender plans, but overall inquiry was weak. According to Mysteel data, BHP Billiton released its production and sales report for the fourth quarter of 2025. The report indicated that Pilbara operations' iron ore production (on a 100% basis) reached 76.326 million tons for Q4 2025, up 7.96% quarter-on-quarter and 4.26% year-on-year. Regarding sales: BHP's total iron ore sales volume for the quarter was 75.397 million tons, increasing 6.81% QoQ and 3.86% YoY; lump ore sales accounted for 20.595 million tons, while fines sales were 46.314 million tons. BHP maintained its iron ore production guidance for the 2026 fiscal year (July 2025-June 2026) unchanged at 258-269 million tons.
Supply, Demand, and Logic: Supply: Shipments from Australia and Brazil declined, and the volume of imported iron ore arriving at Chinese ports also fell, although it remains at historically high levels. Demand: Hot metal production has decreased, indicating a clear weakening in demand. Inventory: Port inventories continue to accumulate, showing a slight increase month-on-month. The iron ore supply-demand imbalance is intensifying. However, due to reduced liquidity for some port cargoes, the fundamental picture appears slightly better than the data suggests. High ore prices continue to stimulate supply release. Conversely, if the factors restricting liquidity are resolved, port cargoes could create a supply shock. Therefore, significant uncertainty exists for the longer-term outlook. In the short term, as steel mills face winter restocking needs, iron ore prices are expected to remain volatile. Market focus will be on subsequent iron ore negotiations and the pace of mill restocking.
Strategy Single Position: Short on rallies Inter-product: None Inter-temporal: None Futures-Spot: None Options: None
Risks Macro policies, steel mill hot metal production levels, steel mill profitability, and overseas shipment volumes.
Coking Coal and Coke: Weak Steel Demand Leads Raw Materials Lower Market Analysis Futures and Spot: Yesterday, influenced by falling steel prices, the coking coal futures main contract closed at 1,124.0 yuan per ton, and the coke main contract settled at 1,673.5 yuan per ton. Losses extended in the afternoon session. For coking coal, Mongolian coal imports remain high, domestic coal mine production has recovered, and spot supply is ample, putting pressure on prices and weakening cost support for coke. For coke, the first proposed price increase has not yet been implemented. Steel mills, facing poor profits and adequate inventory, show weak willingness to restock raw materials. Furthermore, as downstream阶段性 restocking is completed, bullish market sentiment is receding.
Supply, Demand, and Logic: Currently, downstream steel prices are soft, and hot metal production is fluctuating at low levels. The steel market is characterized by weak supply and demand, leading to price negotiations between steel mills and coking plants. Pre-Chinese New Year restocking by steel mills is expected to provide some demand support. Coke prices are likely to fluctuate in the short term, with attention on the implementation of the first coke price increase. For coking coal, short-term fundamental contradictions are relatively manageable. With three weeks remaining until the Spring Festival, pre-holiday restocking expectations persist. Coupled with a rebound in thermal coal prices, coking coal's downside is expected to be limited, maintaining a volatile trend. Key factors to watch include coking coal supply policies, steel mill profits, coking plant profits, and finished steel demand.
Strategy Coking Coal: Volatile Coke: Volatile Inter-product: None Inter-temporal: None Futures-Spot: None Options: None
Risks Macro policies, steel mill profits, coking plant profits, finished steel demand, and coal supply.
Thermal Coal: Quiet Trading at Ports, Weak Price Declines in Production Areas Market Analysis Futures and Spot: In production areas, thermal coal prices showed weak declines. End-users like metallurgical, chemical plants, and power plants are purchasing based on immediate needs. Recently, speculative market participants have adopted a wait-and-see approach, leading to reduced transportation demand from surrounding coal yards and stations, which are focusing on destocking. Some mines reported fewer coal trucks and rising inventory. Mine operators are closely watching port transactions and pricing trends of major groups. At ports, thermal coal market prices trended weaker. Downstream procurement enthusiasm declined, and market sentiment gradually turned bearish. Some traders slightly lowered their offers to accelerate sales. However, other traders, supported by their cost of goods, were reluctant to sell at low prices. In the short term, the market is expected to maintain its weak trend. In the import market, trading activity was quiet recently. Tender prices declined, but offers for low-calorific value coal from foreign miners remained firm due to tight supply, creating a cost-price inversion for buyers. High-calorific value coal faced poor liquidity, with downstream acceptance limited, following the downward trend of domestic coal prices.
Strategy None