Price trends

According to the commodity market analysis system of SunSirs, the domestic hot rolled coil market in August exhibited a pattern of initial weakness followed by a fluctuating upward trend during the latter half of the month. Market dynamics were driven by costs and rising expectations for the peak season, despite sluggish actual demand. Throughout the month, rising costs for iron ore and coke provided strong support for hot rolled coil prices; however, the high-temperature off-season constrained downstream operations, limiting actual consumption. The market remained in a tug-of-war between "strong costs, weak current reality, and strong expectations." As the month drew to a close and the market transitioned toward the traditional peak season, the price level shifted significantly higher than the month's lows. As of August 31, the average domestic market price for hot rolled coils stood at 3,415 RMB/ton (up 2.675% month-on-month), while the average price for cold-rolled sheets was 3,770 RMB/ton (down 0.448% month-on-month). The current price spread between cold-rolled and hot rolled products is approximately 355 RMB/ton.

Cost side: Raw material prices continued to recover, and the floor support was steadily solidifying.

In August, the constraining effect of costs on the hot rolled coil market became increasingly evident. During the first ten days of the month, iron ore prices remained firm, while coke prices saw multiple rounds of increases that were gradually implemented; consequently, steel production costs continued to rise and profit margins on finished products were further squeezed. With some steel mills operating on razor-thin margins or even at a loss, there was growing pressure on them to hold firm on prices.

The raw materials sector generally exhibits a trend where prices are prone to rising but resistant to falling, effectively capping any significant downside for hot rolled coil prices. However, downstream acceptance of high steel prices is limited, and the pass-through of costs is sluggish; the pace of spot price increases is constrained by demand, meaning the raw material support primarily serves to establish a price floor rather than driving a sharp rally. Fluctuations in ferrous futures markets mainly influence trading sentiment but have a limited substantive impact on spot prices.

Supply side: Production was contracting at the margin, and overall supply pressure was easing.

Throughout August, squeezed profit margins prompted an increase in maintenance activities across domestic hot rolled steel production lines. Consequently, overall hot rolled coil output declined month-on-month, and the industry's operating rate edged down; this marginal contraction in supply helped alleviate some of the market pressure caused by high supply levels.

Overall, however, supplies of standard specifications remained plentiful, with no shortages observed. As the month drew to a close, market conditions improved, raising expectations that some production lines undergoing maintenance would resume operations, thereby creating the potential for a rebound in supply. Steel mills maintained a steady pace of shipments; supplies for direct supply channels remained stable, and the volume of resources available in the circulation market stayed at reasonable levels.

Demand and Inventory: Consumption remained weak during the off-season; inventory showed slight fluctuations.

On the demand side, August is a traditional off-season for steel consumption; high temperatures have hampered construction progress on outdoor infrastructure and steel structure projects. Downstream sectors—such as machinery manufacturing and pipe processing—are maintaining low inventory levels, relying primarily on sporadic, on-demand purchasing rather than bulk restocking. Speculative market demand is virtually non-existent, with transactions driven mainly by essential needs, resulting in an overall subdued trading atmosphere.

As late August approaches, market expectations for the traditional September peak season are steadily rising, and both traders and end-users are beginning to consider their procurement schedules for the coming period; however, actual orders have yet to materialize on a large scale, revealing a clear gap between expectations and reality. On the export front, the external environment remains complex and growth is limited, providing little stimulus to the domestic market.

Regarding inventory, August saw a divergence between social inventories and steel mill inventories: mill stocks declined somewhat, while social inventories saw a slight accumulation. Overall inventory pressure remained manageable, with no risk of a sharp buildup; consequently, the inventory situation exerted neither significant downward pressure on the market nor provided any notable bullish support.

Market outlook

Overall, the hot rolled coil market is expected to show a trend of steady-to-strong performance in September, with the extent of the market movement largely dependent on the actual volume of orders placed by end-users. Key factors to monitor going forward include fluctuations in raw material prices, the pace of maintenance and production resumption at steel mills, the rate of social inventory depletion, and actual consumption levels of finished steel products in downstream sectors such as machinery and infrastructure.

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