The first half of 2026 saw the hot-rolled coil market experience a "triple-fold" pattern of decline, rise, and subsequent decline, with market drivers frequently alternating between fundamental and macroeconomic factors. However, the average price for the half-year period still showed a downward trend compared to both the preceding and year-ago periods.
The market's journey in the first half was characterized by significant volatility, driven by a shifting interplay between macroeconomic conditions and fundamental supply-demand dynamics.
Specifically, prices fluctuated and declined from January to February. From March onward, a gradual price increase began, which accelerated into May. However, starting mid-May, the price trend reversed into a decline once more. Looking at the half-year average price, as of June 26th, the average price for hot-rolled coil stood at 3,319.46 yuan per ton. This represents a decrease of 1.06% compared to the average price in the second half of the previous year and a 0.71% decrease compared to the first half of the previous year. The continued downward shift in the average price for the first half of 2026 aligns with the gradually intensifying supply-demand imbalance in the current market. The consecutive price increases from March to May provided some uplift to the previously subdued hot-rolled coil market, improving trading activity and merchant sentiment. However, with prices turning downward again, the market has fallen back into a state of stagnation.
Examining the driving factors for the first half, the landscape was one of frequent switching between fundamental and macroeconomic influences. From a fundamental perspective, the overall direction was bearish, with only rising costs providing some support to prices. In contrast, macroeconomic news was predominantly bullish.
Supply Analysis: Persistently High Output
Comparing monthly production figures over the past two years, only January showed a year-on-year decline in output. For all other months, production exhibited a growth trend. Particularly in May, with relatively robust corporate profitability boosting production enthusiasm, monthly output of hot-rolled coil surpassed 30 million tons for the first time, reaching 30.1285 million tons and setting a new historical record. Although steel mills reduced output in June, production still showed a year-on-year increase. From January to June, the total output of hot-rolled coil reached 171.6079 million tons, a year-on-year increase of 3.07%. Supply in the market continues to maintain an upward trend, exerting significant pressure.
Demand Overview: Mixed Performance Across Sectors
Demand for hot-rolled coil in the first half essentially peaked in May before experiencing a certain decline. In June, both supply and demand in the market were weak, but the decline in demand was greater than that in supply. This exacerbated the supply-demand imbalance in the hot-rolled coil market. Against the backdrop of weak demand, traders faced increased difficulty in moving inventory, further pressuring the market. Under the influence of this supply-demand contradiction, hot-rolled coil prices once again shifted into a downward trend.
Inventory Status: Persistent High Levels
The year 2026 began with high inventory levels. Following the Spring Festival holiday, social inventories accumulated to a peak of 4.3332 million tons. Against the backdrop of tepid market demand and high supply, the pace of social inventory drawdown was generally slow. By late June, social inventories had begun to increase again. However, as market conditions gradually weakened and sentiment remained subdued, the willingness to restock was limited, leading to a narrow increase in social inventories. High inventory levels were a persistent feature throughout the first half of 2026. With the fading influence of news-driven factors, high inventories coupled with the significant supply-demand imbalance became the primary drivers pushing market prices lower.
Cost Factors: Diverging Raw Material Prices
In the first half of 2026, the prices of coke and iron ore, the main raw materials for hot-rolled coil, moved in opposite directions. Coke prices gradually rose, while iron ore prices trended downward. Particularly from mid-May, the price fluctuations for both coke and iron ore widened. Coke has now undergone eight rounds of price increases, with a cumulative rise of 28.67% since the beginning of the year. Conversely, iron ore prices have fallen to around the 700 yuan per ton mark, representing a decline of 12.5% from the start of the year. With raw material prices moving in opposite directions, the cost line for hot-rolled coil has risen slowly. According to the latest data, as of June 25th, the cost of hot-rolled coil was 3,336 yuan per ton, an increase of 0.78% from the beginning of the year. The relative strength of coke prices has, to some extent, buffered the price decline caused by the supply-demand imbalance, resulting in a narrower market price drop.
Macroeconomic Influences: Concentrated News Flow
Starting in March, against the backdrop of conflict in the Middle East, crude oil prices experienced a broad upward movement, driving consecutive increases in domestic commodity prices. This was especially pronounced in the energy and chemical sectors, where coking coal futures experienced multiple limit-up sessions, leading to a synchronized rise across the ferrous metals complex. In April, domestic news regarding anti-internal competition lifetime accountability and carbon reduction measures continued to boost market sentiment, pushing prices further upward. Following the May Labor Day holiday, market inventories did not accumulate as expected, and expectations for steel mill production cuts at the beginning of the month were high, leading to an acceleration in the price rally. Boosted by various news factors, hot-rolled coil achieved an upward trend lasting three months, marking the longest sustained rise in the past three years. However, as the influence of market news faded and the market reverted to being driven by fundamentals, prices once again shifted into a downward trajectory.
Outlook for the Second Half: Potential Price Trajectory
Looking at the trend for the second half of the year, the market may once again experience a "triple-fold" pattern of decline, rise, and decline. It is anticipated that prices will continue to fall through mid-to-late July, gradually turning upward from late July, with the upward trend extending into August. Starting in September, prices are expected to fluctuate and decline again, with the downtrend potentially continuing until year-end. In terms of average price levels, the price decline in the second half is expected to be relatively moderate, and the average price for the second half is projected to be higher than that of the first half.
From a macroeconomic perspective, the convening of important domestic mid-year meetings in late July is expected to foster relatively optimistic market sentiment, potentially driving a wave of price increases from late July through August.
On the supply side, two new hot-rolling production lines were commissioned in North China in the first half. As these lines complete debugging and officially enter operation, hot-rolled coil production in the second half may continue to rise, sustaining high supply pressure in the market.
Regarding demand, based on research into the operating conditions of various end-user industries, production and sales data for sectors such as automobiles, real estate, exports, and urban rail transit have all shown declines. This hampers demand growth for hot-rolled coil, keeping the market under persistent supply-demand pressure, which is also the main reason for the bearish price outlook from September to December.
In terms of costs, substantial production cuts in Shanxi coking coal are likely to keep prices high in the second half. Consequently, coke prices are expected to remain elevated. However, with port inventories for iron ore still relatively high, ore prices may decline. With raw materials continuing their opposite trends, the cost line for hot-rolled coil is likely to experience high-level fluctuations.