📅 2026-10-08 · HRC · Single-name brief Legacy coverage

This report is provided by MacroTerms.com

Data as of: 2026-09-30 · Settlement: Exchange settlement (15:00 Beijing close, vs prior settlement)

SHFE Hot-Rolled Coil Main Continuous (SHFE.HC) In-Depth Analysis Report | Bearish Bias: Decline on Falling Open Interest and Inventory Pressure | 2026-10-08

This report gives a bearish bias for the SHFE hot-rolled coil main continuous (HC2701). The core drivers are a break below a key support level accompanied by a decline on falling open interest, indicating active long liquidation, while inventories at a five-year seasonal high weigh on prices. Technically, price is near the lower edge of the 20-day channel, with pivot S1 support under pressure. Fundamentally, inventory pressure and insufficient processing margins constitute the main negatives. The invalidation condition is a daily close back above 3287.67 (R1) or two consecutive daily closes above 3300.

I. Bottom Line & Directional Bias

This report issues a clear bearish directional call on SHFE HRC main continuous (HC2701). The core logic rests on three points: first, a technical breakdown, with the [10-08 settlement] at 3,249 below pivot S1 of 3,266.67 and near the lower band of the 20-day channel at 3,270, confirming a short-term downtrend; second, fund flows show a decline on open interest cut, with main nominal positions down CNY 435m, indicating active long liquidation rather than aggressive short selling—downside momentum has weakened but the trend remains intact; third, significant fundamental inventory pressure, with inventories above the five-year seasonal average, capping any price rebound.

The invalidation condition is set as follows: if the daily close reclaims 3,287.67 (R1) or holds above 3,300 for two consecutive sessions, the bearish thesis fails and the stance shifts to neutral/watch. In the current environment, short covering may trigger a near-term bounce, but lacking fundamental support, the overall view remains bearish.

II. Price Action & Technical Analysis

On price action, the [10-08 settlement] of 3,249 fell 1.22% versus the prior session's settlement of 3,282, breaking below pivot S1 of 3,266.67 and sitting near the lower band of the 20-day channel at 3,270. The 5-day change is -0.76% and the 20-day change is -3.36%, showing both short- and medium-term trends pointing lower. ATR14 is 25.71 (0.79%), with a wide intraday full range; RV20 is 7.8%, indicating a recent rise in volatility.

Technically, price has broken below pivot P of 3,280.33 and tested S1 support at 3,266.67. A decisive break below S1 would open the next support at the 20-day low of 3,270. On the weekly chart, the last completed week (2026-09-28 to 2026-09-30) closed at 3,274, with a weekly change of -0.73%; there are no settled daily sessions yet this week, so the weekly conclusion references only the completed week. Price is at the lower band of the 20-day channel; a further break below 3,270 could open additional downside.

In the night session, [10-08 night session] opened at 3,264, with a high of 3,265, a low of 3,238, and a close at 3,242, showing the decline continued overnight. The overall technical picture is bearish, with key resistance at R1 of 3,287.67 and support at S1 of 3,266.67 and the 20-day low of 3,270.

III. Supply-Demand Balance & Fundamental Drivers

Fundamentally, inventory pressure is the main bearish factor. Inventories are above the five-year seasonal average, indicating oversupply or insufficient demand. Although specific inventory figures are not provided, the overhang weighs on prices. On processing margins, no direct data is available, but falling prices may compress steel mill margins and dampen production incentives.

On macro transmission, the black complex is highly sensitive to macroeconomic expectations. The next 7-day calendar shows CPI and PPI releases on October 14, which may affect sentiment in the black complex. If the data disappoint, black complex prices could be further pressured. Additionally, the dollar index DXY stands at 102.14 and the 10Y UST yield at 5.23%; a high-rate environment may restrain industrial demand.

From a supply-demand balance perspective, elevated inventories reflect ample supply, while demand may be soft amid a macro slowdown. Weak processing margins may limit steel mills' willingness to cut output, exacerbating supply pressure. Fundamentals are overall bearish, with inventories and macro expectations jointly driving prices lower.

IV. Positioning & Fund Flows

Positioning shows the top-20 seats hold a net long of 45,201 lots (daily +658 lots), but main nominal positions fell CNY 435m, indicating active long liquidation. The pattern of declining prices on open interest cuts is clear: positions shrank during the decline, pointing to long unwinding rather than aggressive short selling.

On COT weekly change versus price divergence, no direct COT data is available, but the decline in main positions alongside falling prices signals weak long conviction. Comparing implied and realized volatility, RV20 is 7.8% and ATR14 is 25.71; volatility has risen, possibly reflecting increased market uncertainty.

On fund flows, the CNY 435m drop in main nominal positions indicates capital outflows. Net long positions rose by 658 lots, but overall position size contracted, suggesting longs are cautious. Positioning is bearish, and outflows may intensify downside pressure.

V. Cross-Asset Relative Value & Global vs China

On cross-asset relative value, the copper/gold ratio is 1.58, at the 96.83% 1Y percentile and 56.61% 3Y percentile, showing copper is relatively strong versus gold, possibly reflecting growth expectations. The oil/gold ratio is 0.022, at the 92.06% 1Y percentile and 47.88% 3Y percentile, with crude relatively strong versus gold. The gold/silver ratio is 69.95, at the 80.16% 1Y percentile and 26.72% 3Y percentile, with gold relatively strong versus silver.

On global versus China relative value, HRC is a China-listed product, so the onshore-offshore premium warrants attention. No direct premium data is available, but DXY at 102.14 may affect import costs. A high copper/gold ratio may reflect global growth expectations, which would be positive for black complex demand, though current inventory pressure may offset this.

Overall, cross-asset ratios show copper and crude relatively strong versus gold, possibly signaling recovery expectations. However, HRC's own inventory overhang and fund outflows are the main negatives, limiting any positive spillover from cross-asset ratios.

VI. Supply Chain & Seasonal Inventory (Historical Statistics)

Based on the past 12 years of history, counting 20 trading days forward from October 8, HRC main continuous (HC2701) shows a clear seasonal bearish bias. The sample shows an average return of -0.81% and a median decline of -0.91% over this window. Of the 12 years, only 3 posted positive returns—a 25% up probability versus a 75% down probability, a notably high seasonal short win rate. On historical extremes, 2016 was the best, at +27.88%, while 2021 was the worst, at -21.4%. With price at the lower band of the 20-day channel and seasonals showing a high probability of decline with a median drop near -1%, this provides historical statistical support for the current bearish stance. Although the sample is limited, the seasonal pattern resonates with the current technical breakdown and decline on open interest cuts, further confirming the continuation of the short-term downtrend.

VII. Scenario Analysis

Base case (60% probability): the bearish trend continues. Trigger: a daily close decisively below S1 of 3,266.67 with no stabilization above the 20-day low of 3,270. Targets: 3,234 (1:1.5 R/R) and 3,223 (1:1.9 R/R). Recommendation: stay short; add on a rebound toward 3,274, with stop-loss above 3,300.71. If the daily close reclaims 3,287.67 (R1) or holds above 3,300 for two sessions, the bearish thesis fails and the stance turns neutral/watch.

Bullish case (20% probability): an oversold bounce. Trigger: a daily close back above 3,287.67 (R1) or two consecutive closes above 3,300, with a significant volume surge. Targets: 3,300 and 3,315 (prior high). Recommendation: pause shorts; on confirmed breakout, trial a small long with stop-loss below 3,287.67, targeting the prior high of 3,315.

Bearish acceleration case (20% probability): prices accelerate lower. Trigger: a daily close below the 20-day low of 3,270 with open interest still falling, signaling panic long liquidation. Targets: 3,223 and 3,200. Recommendation: hold shorts; add on a break below 3,270, with stop-loss above 3,300.71, targeting 3,223 and 3,200.

VIII. Trading Strategies & Risk Management

Execute the set trades strictly: short entry 3,274, stop-loss 3,300.71, target 3,234 (horizon 1-5d, R/R 1:1.5); short entry 3,274, stop-loss 3,300.71, target 3,223 (horizon 1-2w, R/R 1:1.9). Stop distance is 26.71, equal to 1.02×ATR (ATR14 26.071); contract multiplier is 10; risk per lot is CNY 297 (including fees and slippage). A single-trade risk budget of CNY 6,693 corresponds to a reference cap of 22 lots. The stop is placed at 3,300.71 because it sits above the prior high of 3,300, and a break above 3,300 would confirm the bearish thesis has failed; placing it here avoids false-breakout risk. Position sizing follows the single-trade risk budget cap, ensuring any single loss does not exceed 1% of total capital. Add/reduce rules: if price breaks below 3,270 and open interest keeps falling, add, but total size must not exceed the reference cap of 22 lots; if price rebounds toward 3,274 without triggering the stop, an add may be attempted, but risk must be recalculated.

IX. This Week's Data Calendar

Beijing time October 14 at 09:30, the U.S. CPI y/y release (October 13 at 21:30), with no consensus or prior given, affects the black, nonferrous, and chemicals sectors. The same day at 09:30, PPI y/y, also with no consensus or prior given, likewise affects the black, nonferrous, and chemicals sectors. Focus on whether the prints surprise; if actuals exceed expectations by more than the ±threshold, black complex sentiment could be further pressured.

This report is generated automatically from public quantitative and macro data for research and market tracking only. It does not constitute any investment advice.

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