Hot-rolled coil (HRC) prices in China are projected to fluctuate within a certain range this month, with upside potential in the shape of central government macro-economic meetings later this month buffering against the protracted weakness in HRC fundamentals, Mysteel's latest monthly report on the flat product suggests.

During November, HRC market conditions were strained by protracted loose supply and elevated inventories at steel mills and commercial warehouses, which caused hot coil prices to soften. Mysteel assessed the average price of Q235 4.75mm HRC nationwide during the full month of November at Yuan 3,318/tonne ($469/t) including the VAT, lower by 1% from the October average.

Entering December, the latest Mysteel survey results released on December 4 showed that HRC output declined on-week during November 27-December 3 though not to the extent that the fall triggered any rapid destocking among mills and traders, the report observed. The rebalancing of supply and demand will continue to be delayed, it added.

On December 4, the stocks of hot coils sitting in the 194 commercial warehouses in the 55 cities nationwide regularly tracked by Mysteel's totaled 4.32 million tonnes, lower by only 3.9% on month and higher by 23.4% from December 5 last year.

On the other hand, domestic demand for the flat steel is unlikely to see any significant improvement while the country's property market remains in the doldrums, and while manufacturing slows towards year end, the report suggests. The most recent China Purchasing Managers' Index (PMI) for the manufacturing sector remained in the contraction zone at 49.2 in November, though this was up by 0.2 point from the previous month, as reported.

HRC exports may provide something of a respite for China's flat product makers but won't provide a reversal of fortunes for the mills, given that HRC export volumes are dwindling. The latest data from China's General Administration of Customs shows that HRC exports during October totaled 1.68 million tonnes, down by a striking 45.8% on year and by 3.1% on month, while total HRC exports over January-October amounted to 18.29 million tonnes, lower by 23.9% on year.

On the cost front, support for the coil producers from raw material prices is also expected to wane in December as raw material prices – especially those of coking coal – have shown more signs of weakening recently, preventing mills from citing higher production costs to justify higher sales prices. Mysteel had assessed the national composite coking coal price on December 8 at Yuan 1,317/t, lower by Yuan 79.8/t or 5.7% on month.

But the outlook for the coils is not all grim, the report says. It notes that the annual Central Economic Work Conference (CEWC) to be held in Beijing in mid-December may give some upward momentum to flat steel's prices if Beijing announces new policies that could help boost consumption. Similarly, should the US Federal Reserve cut interest rates this month, this too may give a lift to commodity prices.

On December 8, China's national price of Q235 4.75mm HRC under Mysteel's assessment sat at Yuan 3,313/t, higher by Yuan 3/t on month.

On the same day, the most-traded HRC contract for next May delivery on the Shanghai Futures Exchange ended the daytime trading session at Yuan 3,291/t, higher by Yuan 31/t or 0.95% from the settlement price a month earlier, the bourse's data showed.

Consequently, both hot coil users and coil producers are waiting expectantly for the convening of the CEWC that they hope will provide some clarity for the direction of the flat steel market as it heads into 2026.  At last December's meeting to set this year's goals, the conference outlined nine key tasks for 2025, with "vigorously boosting consumption, improving investment efficiency and expanding domestic demand on all fronts" listed as the top priority, Mysteel Global notes.

Source:Mysteel Global