Current fundamentals are limited, and short-term macro expectations may drive the recovery of steel prices from low levels.

On December 4th, the price of the main contract for hot-rolled coil in the domestic futures market, 2605, saw a slight increase to 33,320 RMB/ton at the close of trading.

Price low-level fluctuation

After reaching a high point of 6,700 RMB/ton in 2021, the market price of hot-rolled coil has been fluctuating downward, and it has been in a weak market state throughout 2025. In June 2025, the price of hot-rolled coil approached the price low point of 3,000 RMB/ton, and although it improved somewhat due to the good demand in the third quarter, the market price center dropped again after entering the fourth quarter.

"The average price of hot-rolled coil in 2025 maintained a low-level fluctuating trend as a whole, but steel mills were able to break even and were profitable for most of the year, with the exception of the fourth quarter when hot-rolled carbon steel showed a loss. The improvement in corporate profit conditions has led to a recovery in the vitality of hot-rolled coil production enterprises," said Li Huan, an analyst at Zhongchuang Information. In 2025, the cost line of hot-rolled coil was mostly below the price, leaving steel mills with a relatively sufficient profit margin. During the period, the decline in hot-rolled coil prices was slower than the cost during the decline, but the price increase was faster than the cost during the increase.

According to monitoring, the maximum annual profit of hot-rolled coil in 2025 is 264 RMB/ton, the minimum is -146 RMB/ton, the average profit is 49.06 RMB/ton, and it increased by 311.61% year-on-year (the average values in this article are all the average levels from January 3 to December 3, 2025).

Costs are relatively stable.

Hot-rolled coil, as a typical long-process smelting product, has coking coal and iron ore as its most important raw materials. By 2025, the proportion of iron ore and coking coal in the cost of hot-rolled coil will basically remain at 55% to 60%. Against the backdrop of relatively stable costs such as labor, water and electricity, and processing fees, the price fluctuations of coking coal and iron ore have become the main reasons for the changes in the price of hot-rolled coil.

Li Huan said that the cost decline of hot-rolled coil in 2025 was greater than the price decline. Specifically, the average cost of hot-rolled coil in 2025 was 3,244.7 RMB/ton, down 10.9% year-on-year. The average price of hot-rolled coil was 3,355.95 RMB/ton, down 8.64% year-on-year.

The price trend of coking coal and iron ore for hot-rolled coil in 2025 is relatively consistent. Specifically, from January to July, the raw material coking coal has dropped 13 times, and the price of iron ore has maintained an upward and downward trend. The combined effect of the two has led to the lowest cost of hot-rolled coil, falling to 2,989 RMB/ton, a decrease of 11.84% from the beginning of the year. The cost decline is faster than the price, leaving a larger profit margin. From the second half of the year, the raw materials iron ore and coking coal turned to an upward trend. From July to August, the market was relatively well-informed, and the price of hot-rolled coil increased more than the cost, thus the profit margin for enterprises continued to expand, with a maximum of 264 RMB/ton. From September, market demand did not meet expectations, and the price increase was hindered, leading to a fluctuating downward trend, while the cost continued to maintain a strong trend. The high cost squeezed the profit margin of hot-rolled coil, and at the same time, it also formed a good support for the spot price, which is also the main reason for the narrow decline of hot-rolled coil prices in the second half of the year. Most of the time in 2025, the steel mill's profit was relatively rich, which kept the hot-rolled coil enterprises with a high enthusiasm for production.

"Comparing the monthly production of the past two years, the monthly production in 2025 has been above that of 2024. It is expected that the full-year production will reach 338 million tons, an increase of 6.15% year-on-year. The improvement in profit levels has also led to a continued increase in market supply pressure, especially in October, when the monthly production of hot-rolled coil reached the annual peak level of 29.4362 million tons, and in November, it basically maintained a high production state," Li Huan said.

Corporate profits improve

Although the overall profitability of hot-rolled coil manufacturers was good in 2025, the supply pressure was high, which led to a decline in hot-rolled coil prices in the fourth quarter. Starting in October, hot-rolled coil plain carbon steel began to incur losses, and the cost line of hot-rolled coil returned to above the price again. The highest loss for steel mills was 146 RMB/ton. During this period, low-alloy steel and other high-specification varieties still had profits, which drove enterprises to produce varieties with higher profit added preferentially, thus promoting product upgrading and optimizing the resource circulation structure in the trading market.

Li Huan believes that the profit situation of hot-rolled coil in December may gradually improve. At present, raw material coke has shown a certain decline, the first round of price adjustment of coke began at the end of November, and there is still 1-2 rounds of price adjustment expected, which will drive the cost of hot-rolled coil down. In terms of price, there is an expectation of price increase for hot-rolled coil in December, mainly because there may be more market information in December, and the steel mill's production reduction and maintenance are relatively concentrated, and the production may decrease, which will relieve market pressure. Under the synchronous action of cost decline and price rise, the loss of hot-rolled coil enterprises may gradually converge.

Hongyuan Futures believes that the policy window period entered in December, and the domestic and foreign macro boost has lifted market expectations, and steel prices may rebound at a low level. From the fundamental perspective, the supply and demand of finished products are both in a declining stage during the off-season, and the current investment data is still weak, the domestic demand performance is not good, and the export maintains a strong resilience, and the advantage of trading volume at a lower price still exists. On the supply side, the current stage is a reduction in production, because the profit per ton of steel has not yet appeared in a large loss, so the production is repeated at a high level, the de-stocking is not smooth, and the reduction in production needs to be continuously observed recently. In summary, the current fundamental driving force is limited, and the short-term macro expectation may push the steel price to repair at a low level.

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