Steel prices are gradually stabilizing and rebounding
China's economic data for the first quarter of this year exceeded expectations. Many indicators in the real estate sector showed a significant narrowing of the decline, while infrastructure and manufacturing investment growth accelerated noticeably, and domestic demand showed strong resilience. Currently, Steel prices The main downward pressure on steel prices comes from the export side: In February, Vietnam launched anti-dumping measures against Chinese steel, and the US also increased tariffs on Chinese goods during the period of January to April. Although the subsequent impact of tariffs on exports remains uncertain, the futures market has basically absorbed the relevant negative factors. Considering the possibility of easing negotiations on tariffs in the future and the expectation of further domestic policy support, it is expected that steel prices have reached a short-term low and will begin a fluctuating rebound in the short term.
From January to mid-April 2025, Steel prices showed a fluctuating downward trend. During this period, Pig iron production exceeded market expectations, but overall raw material supply was relatively ample. Due to high inventories, coking coal prices continued to fall under pressure; Iron ore except for a brief disruption in February due to a hurricane, also remained weak under expectations of high supply. These dual factors continuously lowered steel production costs.
The impact on exports was also significant. On February 21, Vietnam announced the imposition of temporary anti-dumping duties on certain hot-rolled steel products originating from India and China, with a maximum tariff rate of 27.83%. In the first quarter of 2025, the US not only imposed an additional 20% tariff on Chinese goods but also imposed an additional 25% tariff on steel and aluminum imports. Entering April, the US implemented a so-called "reciprocal tariff" policy. Against the backdrop of rising trade protectionism, the global economic outlook is uncertain, further exacerbating the downward pressure on steel prices.
In the first quarter of 2025, steel market demand showed a differentiated trend. From the perspective of domestic demand, the impact of manufacturing, infrastructure, and real estate on steel demand varied. Driven by the "two-heavy, two-new" policy, steel demand in industries such as automobiles, home appliances, and machinery increased significantly. From January to March, manufacturing investment grew by 9.1% year-on-year, with automobile sales increasing by 11.2% year-on-year. It is expected that in the second quarter, under multiple favorable policies, automobile production and sales are expected to maintain double-digit growth; the combined production of the three major white goods in the home appliance industry in April increased by 4.3%, and the growth rate of steel demand in the second quarter is expected to exceed 5%; the sales volume of excavators in the machinery industry increased by 22.8% year-on-year from January to March, and demand in areas such as engineering machinery, agricultural machinery, and machine tools rebounded, with steel consumption demand expected to continue to grow in the second quarter.
In terms of real estate, sales remained essentially flat from January to March, and it is expected that the decline in steel demand in the second quarter will narrow to within 10%. Infrastructure demand performed brightly, with narrow-sense infrastructure investment growing by 5.9% year-on-year from January to March, and steel demand is expected to grow by 8% in the second quarter.
The uncertainty of steel demand in the second quarter mainly comes from overseas markets, which is the main reason why domestic demand was positive but steel prices fell from January to April. In 2024, China's steel exports exceeded 100 million tons, and the proportion of exports in China's steel sales structure has significantly increased. Although the annual steel demand in these two major markets, Vietnam and the US, is expected to decrease by 20 million tons, China's steel exports from January to March this year increased by 6.3% compared to the same period last year. Given the current expectations of easing tariff policies, the actual decrease in demand in Vietnam and the US may be less than 20 million tons. Overall, it is expected that the month-on-month decline in steel exports in the second quarter will be limited.
The steel market in April showed structural differentiation. Rebar weekly destocking volume remained at around 500,000 tons, which is basically the same as the same period last year and has continued to improve month-on-month. The current total inventory has fallen to 7.33 million tons, and it is expected to fall below 7 million tons at the end of April. Shortages of specifications have appeared in some areas, showing that demand-side resilience has increased.
On the cost side, fluctuations in raw material prices have a significant impact on steel prices. The coking coal market constrained by high supply and high upstream inventory pressure, prices continued to weaken, and the main contract 2505 fell below the 900 yuan/ton mark. However, with the reduction in domestic and some sea freight coal supplies, coking coal prices have limited further downside potential. On the iron ore side, global shipments in the first quarter decreased by about 8 million tons year-on-year, and shipments in April did not show a significant increase. With pig iron production significantly higher than last year, the accumulation of pressure on iron ore inventories is manageable in the second quarter, and the main contract 2509 is deeply discounted to spot prices, with the futures market continuing to strengthen and a clear trend of basis repair.
In summary, on the one hand, the current market has fully priced in pessimistic export expectations, and the probability of continued improvement in domestic steel demand in the second quarter is relatively high; on the other hand, the current steel price has reached the lowest level since the end of September 2024. Under the dual effects of improved supply and demand patterns and cost bottom support, the downward momentum in the future has significantly weakened. Therefore, it is expected that steel prices will gradually stabilize and rebound. However, we must remain vigilant against risk factors such as unexpected contraction of overseas demand.
