Sina Finance 2025-04-07 10:07 Yunnan
Keywords: Hot rolled coil, range-bound fluctuations, strong supply and weak demand

[Introduction] In the first quarter of 2025, the hot rolled coil market did not show a clear unilateral trend, instead moving sideways. In terms of average prices, the monthly average price of hot rolled coil declined quarter-on-quarter. The reasons for this lie mainly in the weak fundamental operating environment and the alternating influence of macroeconomic news.

In Q1 2025, the hot rolled coil market exhibited range-bound fluctuations, with prices moving between 3,360–3,460 yuan/ton. In terms of monthly averages, the figures for January to March were 3,432.99 yuan/ton, 3,429.15 yuan/ton, and 3,395.04 yuan/ton, respectively, showing a stepwise decline in price levels. The primary reasons for this trend include the weak fundamental operating environment and the intermittent release of macroeconomic news.

Fundamental Analysis: Strong Supply vs. Weak Demand and Gradually Declining Social Inventories

Supply Side:
Based on daily production data for hot rolled coil, output generally increased during Q1. Specifically, the average daily production in Q1 2025 was 927,000 tons, up 8.69% compared to Q4 2024 (852,900 tons). The continued rise in hot rolled coil production was mainly due to weaker demand and lower profitability for related products like rebar, prompting steel mills to shift production focus to hot rolled coil. Additionally, a new hot rolling production line was added in North China during Q1, further boosting output.

Demand Side:
According to weekly transaction data from SCI Monitoring, after peaking in early January, hot rolled coil sales showed a fluctuating downtrend, reflecting relatively sluggish market demand. Against the backdrop of high supply, weak demand exacerbated the oversupply situation, driving monthly price declines.

Social Inventories:
By the end of 2024, as prices trended downward and market confidence waned, traders were reluctant to stockpile. As a result, social inventories of hot rolled coil after the 2025 Lunar New Year were lower than in previous years. Inventories gradually accumulated in February, peaking at 3.9162 million tons before declining. Since most traders kept inventories within manageable levels, prices showed some resistance to further declines. Additionally, steel mills adjusted their production mix, reducing the proportion of general carbon steel resources, leading to tight supply in several markets and providing some price support.

Macro News: Mixed Sentiment in Q1

Domestic news mainly focused on policies to boost consumption and control crude steel production, while international developments centered on tariffs imposed on Chinese imports. The interplay of bullish and bearish news, along with irregular updates, led to frequent price fluctuations without a clear trend.

Q2 Outlook: Hot Rolled Coil Prices May Break the Sideways Trend, Likely Trending Downward

Supply Side:
According to SCI's survey of steel mill production plans for April, output reductions and maintenance are expected to result in a loss of 2.8705 million tons, a decrease of 1.0381 million tons compared to March. This suggests April production could rise by nearly 1 million tons month-on-month, further increasing market supply pressure.

Demand Side:
SCI's monitoring of end-user industries for hot rolled coil shows no signs of improvement. As the peak demand season ("Golden March, Silver April") ends, southern China will enter the rainy season in May, potentially impacting transportation and production in downstream industries, leading to continued weak domestic demand. On the export front, tariffs imposed by multiple countries on Chinese steel products may raise export costs and limit overseas sales. The supply-demand balance sheet indicates that supply will grow in Q2 while demand remains flat, worsening the imbalance and putting downward pressure on prices.

Macro News:
Domestic policy support is expected to peak, with diminishing positive effects on the market, while international news leans bearish—focusing on tariffs on Chinese steel exports and potential reductions in U.S. interest rate cuts. Overall, macroeconomic factors are unlikely to provide significant support for hot rolled coil prices in Q2.

Market Sentiment:
As prices trend lower, trader sentiment may shift from holding firm to actively cutting prices to minimize losses, accelerating the decline.

Conclusion

The hot rolled coil market in Q2 is expected to transition from sideways movement to a downtrend. April will likely continue the range-bound pattern, but prices may start falling in May as demand weakens further, breaking the previous range. The downtrend is expected to persist into June.

https://finance.sina.com.cn/money/future/2025-04-07/doc-ineshzpx7920259.shtml