1. How does the futures market for galvanized coil affect spot prices? What are the basic principles?
A: Galvanized coil itself does not have an independent futures contract in the domestic market. Its price is mainly affected by both upstream hot-rolled coil futures and raw material zinc futures through a "dual cost transmission" mechanism. On the one hand, the trend of hot-rolled coil futures directly determines the base material cost of galvanized coil. When hot-rolled coil futures strengthen, the cost of galvanized coil manufacturers increases, forcing them to raise ex-factory prices, and the spot market follows suit; conversely, when hot-rolled coil futures fall, the support for the spot market weakens. For example, in May 2026, the sustained strong performance of hot-rolled coil futures directly supported the price increase of galvanized related products. On the other hand, zinc, as the main raw material for coating, is also transmitted to the galvanized coil spot market through the cost path due to fluctuations in Shanghai zinc futures. Data shows that when the Shanghai zinc main contract weakened in May 2026, the decline in futures prices directly dragged down the sentiment of the spot market, demonstrating a clear futures-spot linkage effect. Ultimately, the spot price of galvanized coils is more of a result of the futures market indirectly "directing" its upstream raw materials.
2. How do price fluctuations in the futures market affect the psychology and actual transactions of galvanized coil spot traders?
A: Futures price changes do not directly affect spot transactions, but they significantly influence the psychological expectations of traders and downstream end-users, as well as the pace of market transactions. When hot-rolled coil futures prices rise, traders generally believe that costs will further increase in the future, thus increasing their reluctance to sell and proactively raising their prices, forcing buyers to accept higher prices. Conversely, when the futures market fluctuates sharply or weakens, market participants develop a wait-and-see attitude, speculative demand is suppressed, leading to a "cooling down" of spot transactions. For example, when the futures market is "jumping wildly," the market is filled with a wait-and-see attitude, downstream buyers postpone purchases, speculative demand for downstream products such as hot-dip galvanized steel pipes is weak, and transactions are halved compared to usual. It is evident that the rise and fall of the futures market directly affects market confidence, and fluctuations in confidence are reflected in the trading activity and pricing intentions of the spot market.
3. Was the price increase of galvanized steel coils in 2025 entirely driven by futures? What were the driving factors besides futures?
A: It wasn't entirely driven by futures. Futures were merely a catalyst in the 2025 market. The fundamental driver came from the "cost-push, demand-mismatch" characteristic created by rising raw material costs and steel mills' proactive price increases. In July 2025, stimulated by "anti-involution" production restriction policies and market rumors of production cuts, hot-rolled coil futures rose steadily, increasing by 13.6%, reaching a nearly four-month high. This supported steel mills raising the ex-factory price of galvanized steel coils by 207 yuan/ton in the same month, with spot prices following suit significantly. However, this round of price increases lacked actual demand support, while inventory continued to accumulate-by the end of November 2025, the national inventory of galvanized steel coils reached 1.3199 million tons, an increase of 278,500 tons compared to the same period in 2024, a rise of over 26%. This suggests that whether the cost-push driven by futures can be sustained depends on whether genuine end-user demand follows suit; otherwise, the spot market will face the awkward situation of "high prices but no sales."
4. What are some practical practices of companies in the galvanized coil industry in using the futures market to hedge against spot price risks?
A: Companies in the upstream and downstream of the galvanized coil industry chain mainly use hedging to lock in costs or sales profits and mitigate the risks caused by fluctuations in raw material (hot-rolled coil, zinc) prices. Large steel companies, such as Shandong Iron & Steel Co., Ltd., have specifically increased their futures hedging business for zinc, using futures, options, and other derivative instruments to lock in the price of zinc raw materials used in their galvanizing process, thereby avoiding fluctuations in operating performance caused by sharp fluctuations in raw material prices. Under the spot trading model, traders protect prices by buying or selling corresponding contracts in the futures market, thus locking in profits. The success of hedging strategies requires that the futures and spot prices move in roughly the same direction, and traders must strictly avoid speculative behavior, managing risks based on actual demand for goods or sales plans to truly achieve the goal of "reducing production risks and stabilizing profits."
5. When assessing the spot price trend of galvanized coil, which futures-related indicators are most valuable for reference?
A: There are three key futures-related indicators that companies can use to predict the spot market price of galvanized coil. The first is the price trend of the main hot-rolled coil futures contract. Hot-rolled coil futures are the most important cost anchoring indicator for galvanized coil; price fluctuations directly affect the cost support strength of galvanized coil, and their trends often show a high degree of correlation. According to industry monitoring, the Shanghai hot-rolled coil spot price trend is highly synchronized with the HC2610 futures trend, and the close linkage between the two directly determines the adjustment rhythm of galvanized coil spot prices. The second is the price change of Shanghai zinc futures, especially when zinc ingot supply is tight, the premium of Shanghai zinc will drive up the production cost of galvanized sheet. The third is the basis (i.e., the difference between the spot price and the futures price). Monitoring the basis changes of hot-rolled coil or Shanghai zinc can effectively judge market expectations and provide an important reference for formulating spot procurement or sales strategies.