[Market Review] Volatile and consolidating

[Information Summary]

1. Huozhou Coal and Electricity Group Co., Ltd. issued a notice regarding the implementation of a "276 working week" policy at Xinzhi, Liyazhuang, and other mines. According to Fenwei statistics, seven mines have received the notice, affecting approximately 7.5 million tons of production capacity. If the "276 working week" policy is strictly implemented, the number of effective production days in the second half of the year will be further shortened, which is expected to tighten coal and even coking coal production in the second half of the year.

2. Daily thermal coal consumption reached a new high.

3. This week, production of the five major steel varieties reached 8.6921 million tons, a week-on-week increase of 17,900 tons. Total inventory of the five major steel varieties reached 13.7536 million tons, a week-on-week increase of 234,700 tons. Weekly consumption of the five major commodities reached 8.4574 million tons, with building materials consumption increasing by 3.4% month-over-month and flat steel consumption decreasing by 2.8%.

4. This week, Mysteel's analysis of 523 coking coal mines confirmed that the capacity utilization rate was 83.9%, a decrease of 2.4% month-over-month. Daily raw coal production averaged 1.883 million tons, a decrease of 53,000 tons month-over-month, while raw coal inventories reached 4.765 million tons, a decrease of 68,000 tons month-over-month. 5. This week, the average daily hot metal output of 247 mines was 240.32 tons, down 0.39%.

[Nanhua Viewpoint] This week, the five major commodities market showed a trend of decreasing supply and increasing demand. Inventory accumulation accelerated month-over-month, particularly in social inventory, likely due to increased holdings in midstream or increased speculation in futures and spot trading. However, total inventories of the five major commodities remained at a relatively low seasonal level. By commodity, the small sample data for rebar outperformed that of hot-rolled coil, corresponding to the narrowing of the coil-rebar spread yesterday. The previous widening of the coil-rebar differential (particularly the 10 contract) was primarily due to the differential pressure on rebar and hot-rolled coil warehouse receipts, as well as the greater impact on hot-rolled coil if production restrictions are implemented. Therefore, if one wishes to narrow the coil-rebar differential, the 10 contract is not the preferred option, and the 01 contract currently lacks significant momentum. The recent announcement of the "276 working days" policy for coking coal has gained momentum. Data from Steel Union and Fenwei Coal Group indicate a decline in coal mine production this week. Combined with record-breaking daily thermal coal consumption and market rumors of the sixth round of price increases for coke, both coke and rebar provide strong support for finished product costs. The quality of downstream demand for finished products during the current peak season remains to be determined, and with the export window still closed, the previous market, driven by expectations, requires support from actual demand and currently lacks a clear driver. However, with no significant selling pressure on the finished product side and solid cost support, downward price resistance is significant, leading to recent volatile consolidation. Future attention will focus on the realization of peak season demand, the dynamics of coal mine overproduction and production cuts, and evolving macroeconomic expectations.

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