Lange Research: Domestic steel market may weaken and bottom out in June

In May 2025, the US-China tariff war was temporarily suspended, and China's loose monetary policy was implemented, including interest rate cuts and reserve requirement ratio reductions. However, due to factors such as the gradual shift of demand towards the off-season and the relatively high level of supply, the domestic steel market still showed an overall fluctuating downward trend. According to data monitored by Lange Steel Information, as of the end of May, the Lange Steel national steel composite price was 3475 yuan/ton (see Figure 1), down 108 yuan/ton from the same period last month, a month-on-month decrease of 3.0%, and a year-on-year decrease of 14.6%. In terms of monthly average, in May, the Lange Steel national steel composite price average was 3538 yuan/ton, down 31 yuan/ton from the previous month, a decrease of 0.9%.

Figure 1 Lange Steel Absolute Price Index Trend (yuan/ton)

Looking ahead to June, the domestic steel market is still affected by multiple factors. External instability and uncertainty remain high, and the foundation for the continued recovery and improvement of the national economy needs further consolidation. In June, there will be more heavy rainfall across the country, which will further slow down the demand for construction steel, and steel social inventories may rise temporarily, exacerbating the supply-demand contradiction. Coupled with further weakening cost support, Lange Steel's big data AI-assisted decision-making system predicts that the domestic steel market in June 2025 may show a weak bottoming-out trend.

The unfavorable factors affecting the price trend of the domestic steel market in June are mainly the following aspects:

First, the global economic recovery momentum is weakening, and the outlook is worsening

The global manufacturing PMI is showing a downward trend. According to JPMorgan Chase data, in April 2025, the JPMorgan Chase Global Manufacturing PMI index was 49.8%, down 0.5 percentage points from the previous month; among them, the output index rose 0.1 percentage points from the previous month to 50.5%; the new orders index was 49.8%, down 1.0 percentage points from the previous month. In the same period, data released by the China Federation of Logistics and Purchasing showed that the global manufacturing PMI in April was 49.1% (see Figure 2), down 0.5 percentage points from the previous month. The continued weakness in global manufacturing reflects the pressure on the global economy. Affected by the US tariff increase, the risk of a global economic downturn is gradually increasing.

Figure 2 Global Economic Performance - Manufacturing PMI (%)

On May 15, the United Nations released the "2025 World Economic Situation and Prospects Mid-Year Update" report. The report points out that since the January 2025 forecast, the global economic outlook has significantly deteriorated. Tariff increases and trade policy uncertainty are putting pressure on supply chains, driving up production costs, leading to slower business investment, affecting both developed and developing economies. The report predicts that global economic growth will slow to 2.4% in 2025, a significant drop from the 2.9% growth rate in 2024. Developing countries that are heavily reliant on trade face multiple challenges, including reduced exports, falling commodity prices, tighter financing conditions, and increased debt burdens. Weak global growth is also further hindering the achievement of the Sustainable Development Goals, exacerbating poverty and inequality, and limiting investment in green transformation. In terms of international trade, global trade growth will plummet from 3.3% in 2024 to 1.6% in 2025. After a short-term boost in avoiding tariffs, commodity trade may contract in the second half of 2025.

Second, the foundation for the recovery and improvement of the domestic economy still needs further consolidation

In April 2025, facing a complex situation where external shocks intensified and internal difficulties and challenges overlapped, China stepped up the implementation of more proactive and effective macroeconomic policies, effectively responding to external shocks, maintaining steady growth in production and demand, maintaining overall stable employment, accumulating and growing new momentum, and maintaining steady growth of the national economy despite pressure, continuing the trend of development towards new and better prospects. Data from the National Bureau of Statistics show that from January to April 2025, the added value of industries above designated size increased by 6.4% year-on-year, down 0.1 percentage points from January to March. Among the "three engines" driving economic growth, total retail sales of consumer goods increased by 4.7% year-on-year, up 0.1 percentage points from January to March; total export volume increased by 6.4% year-on-year, up 0.7 percentage points from January to March; and fixed asset investment increased by 4.0%, down 0.2 percentage points from January to March.

However, judging from the single-month data in April, the year-on-year growth rate of industrial added value slowed down, and the PPI also showed a downward trend month-on-month. Coupled with a slight decline in investment, consumption, and export volume in a single month, a series of data fully confirms that equivalent tariffs have had an adverse impact on China's total demand. The further weakening of various indicators in the real estate sector reflects that there are still many external instabilities and uncertainties in China, and the foundation for the continued recovery and improvement of the national economy still needs further consolidation.

Third, steel production is still at a high level

In April 2025, affected by the tug-of-war in the US-China tariff war, expectations of domestic incremental policies, the resilience of cost support, and the "rush for exports" effect, the intensity of steel production capacity release was somewhat limited. According to data released by the National Bureau of Statistics, in April, national pig iron production was 72.58 million tons, up 0.7% year-on-year, with the year-on-year growth rate narrowing by 2.4 percentage points; national crude steel production was 86.02 million tons, remaining flat year-on-year, turning from an increase to a flat year-on-year growth. In terms of cumulative production, from January to April, the cumulative national pig iron production was 288.85 million tons, up 0.8% year-on-year; and the cumulative crude steel production was 345.35 million tons, up 0.4% year-on-year.

Figure 3 National Crude Steel Production and Year-on-Year Growth

In terms of steel production, both monthly and cumulative production still showed year-on-year growth. In April, China's steel production was 125.09 million tons, up 6.6% year-on-year, with the year-on-year growth rate narrowing by 1.7 percentage points; from January to April, the cumulative steel production was 480.21 million tons, up 6.0% year-on-year. By variety, in April, the production of all varieties except welded steel pipes increased year-on-year; in cumulative production, only the production of steel bars showed a slight year-on-year decrease.

Since May, with the gradual slowdown of demand, the production intensity of steel enterprises has shown a trend of rising first and then falling. According to survey data from Lange Steel Information, the average operating rate of blast furnaces in 100 small and medium-sized steel enterprises nationwide in May was 77.7%, up 0.2 percentage points from the previous month; the daily average output of pig iron in 201 producing enterprises nationwide was 2.341 million tons, an increase of 12,000 tons from the same period last month. In May, the production capacity release of large and medium-sized steel enterprises showed a slight month-on-month decline. According to statistics from the China Iron and Steel Association, in the first half of May, the daily average output of crude steel in key steel enterprises was 2.202 million tons, down 0.5% month-on-month and up 0.1% year-on-year.

The "temporary suspension" of the US-China tariff war and the implementation of interest rate cuts and reserve requirement ratio reductions have temporarily alleviated the "external pressure" since the beginning of the year, and the effect of the domestic "incremental policy" will gradually become apparent, which will effectively stabilize the traditional off-season market that is about to come. Therefore, it is expected that domestic steel production in May may remain high. According to estimates by the Lange Steel Research Center, the daily crude steel production in China in May may remain at around 2.9 million tons.

Fourth, steel social inventories may rise temporarily

In May 2025, steel inventories continued to decline, although the destocking pace slowed. According to data from Lange Steel Information, as of the end of May, steel inventories in 29 key cities totaled 8.356 million tons, a month-on-month decrease of 11.0%, a slowdown of 6.2 percentage points compared to the previous month, and a year-on-year decrease of 28.1%. Construction material inventories were 4.151 million tons, down 17.6% month-on-month and 30.3% year-on-year; plate inventories were 4.204 million tons, down 3.3% month-on-month and 25.8% year-on-year (see Figure 4).

In June, with the arrival of high temperatures and heavy rainfall across the country, construction projects will be significantly constrained, and steel inventories are expected to face a temporary rebound.

Figure 4 Trend of Steel Inventory Changes (10,000 tons)

Fifth, domestic steel demand will continue to weaken.

In May 2025, with increased high temperatures and rainfall in the south, construction material transactions contracted. Lange Steel Information's statistics for May show that the average daily transaction volume of construction steel in 20 key cities was 135,000 tons, a decrease of 13,000 tons from the previous month and a year-on-year decrease of 15.1%.

In May, with the manufacturing sector maintaining growth, the monthly shipment volume of plate products remained resilient. Lange Steel Information's May shipment data shows that the average daily shipment volume of hot-rolled coils in 16 key cities nationwide was 48,700 tons, a decrease of 800 tons from the previous month, a month-on-month decrease of 1.6%, and a year-on-year increase of 5.6%. The average daily shipment volume of thick plates from 105 key distribution companies in 15 key cities nationwide was 53,700 tons, an increase of 800 tons from the previous month and a year-on-year increase of 3.1%.

In June, high temperatures and heavy rainfall will gradually increase, coupled with the temporary suspension of construction sites in many places during the college entrance examinations, construction projects will be suppressed, and the demand for construction steel will further weaken; affected by the decline in the manufacturing order index and the decline in production of some industries, the demand for steel in the manufacturing industry will also gradually come under pressure.

Sixth, raw material prices have fallen, and cost support continues to weaken.

In May, the average price of iron ore fell slightly. According to Lange Steel Information's monitoring data, as of the end of May, the average price of 66% grade dry-basis iron concentrate in Tangshan was 934 yuan/ton, down 6 yuan/ton from the previous month; for imported iron ore, the average price of 61.5% Australian powder ore in Rizhao Port was 759 yuan/ton, down 6 yuan/ton from the previous month.

Figure 5 Trend of Iron Ore Price Changes (yuan/ton)

Regarding coke, in May, coke prices experienced a round of price increases and decreases. According to Lange Steel Information's monitoring data, as of the end of May, the price of secondary metallurgical coke in Tangshan was 1250 yuan/ton, down 50 yuan/ton from the end of the previous month (see Figure 6). In terms of the average, the average price of secondary metallurgical coke in Tangshan in May was 1277 yuan/ton, down 3 yuan/ton from the previous month.

Figure 6 Trend of Coke Price Changes (yuan/ton)

Regarding scrap steel, in May, scrap steel prices showed a fluctuating upward trend. According to Lange Steel Information's monitoring data, as of the end of May, the price of heavy scrap in Tangshan was 2260 yuan/ton, up 10 yuan/ton from the end of the previous month (see Figure 7). In terms of the average, the average price of heavy scrap in Tangshan in May was 2271 yuan/ton, up 29 yuan/ton from the previous month.

Figure 7 Trend of Scrap Steel Price Changes (yuan/ton)

Driven by the decline in the average prices of iron ore and scrap steel raw materials, the average monthly cost level continued to decline, and the cost support for steel prices further weakened. Lange Steel Research Center's cost monitoring data shows that the Lange pig iron cost index calculated using raw materials purchased in May was 100.0, down 1.2% year-on-year; the average cost of ordinary carbon billets excluding tax decreased by 22 yuan from the same period last month, a month-on-month decrease of 0.9%.

The above factors have a significant impact on the domestic steel market in June, but it is also important to note that China's policies to stabilize growth are continuing to take effect, which helps to offset some adverse factors and plays a stabilizing role in the domestic steel market. In the next stage, China will adhere to the general tone of pursuing progress while ensuring stability, fully and accurately implement the new development concept, accelerate the construction of a new development pattern, coordinate domestic economic work and international trade struggles, unswervingly manage its own affairs, unswervingly expand high-level opening to the outside world, focus on stabilizing employment, enterprises, markets, and expectations, solidly promote high-quality development, promote sustained economic recovery and improvement, and the release of liquidity from the loose monetary policy in May, and further incremental policies are expected to be released in June and the third quarter.

In summary, in June, the domestic steel market is still affected by multiple factors, external instability and uncertainty remain high, and the foundation for sustained economic recovery and improvement still needs to be further consolidated; while high-intensity rainfall across the country will increase in June, the demand for construction steel market will continue to slow down, steel inventories may rebound temporarily, the market supply and demand contradiction will intensify, coupled with further weakening cost support, it is expected that the domestic steel market in June 2025 may show a weak bottoming-out trend.