Experts Talk Market - June 2

My Steel:   On the supply side, the supply of the five major steel product categories last week was 8.8085 million tons, a week-on-week increase of 84,100 tons, or 1%. Steel production rebounded slightly in this period, mainly concentrated in a more obvious rebound in hot-rolled coil production; the total inventory of the five major steel products last week was 13.656 million tons, a week-on-week decrease of 329,400 tons, or 2.4%. The total inventory of the five major categories decreased last week, and the inventory changes of construction materials and plates remained consistent, with both showing inventory reduction. The reduction in construction materials inventory was slightly better than that of plates; on the consumption side, the weekly consumption of the five major categories last week was 9.1189 million tons, of which construction material consumption decreased by 3.4% week-on-week, and plate consumption increased by 3.8% week-on-week. Among the five major categories last week, the consumption change structure for construction materials and plates diverged. On the supply side, supply is at a high level in the first half of the year. As the off-season approaches, maintenance plans for blast furnaces and rolling lines are increasing, and future production is estimated to slowly decline; hot-rolled coil production may still be maintained for now, with greater supply pressure; on the inventory side, rebar and hot-rolled coil are expected to continue seasonal inventory reduction this week; on the demand side, apparent consumption of rebar and hot-rolled coil has seasonally peaked and is falling. As the peak in steel demand has most likely already appeared, overall inventory pressure will gradually increase, and total inventory in some regions has already started to accumulate. Attention should be paid to the speed of steel de-stocking and when the accumulation inflection point will appear.

Steel Home: The main contradictions in the current domestic steel market are weak market expectations and high production enthusiasm among steel mills. On the supply side, although the short-term profit margin for steel mills has narrowed, most steel mills still have some profit, and production is basically normal, with blast furnace operating rates maintained above 90%, and electric furnace production remaining stable; on the demand side, the domestic market will face a traditional off-peak consumption season, coupled with the weakening effect of "trade-in" policies, making demand reduction a high probability event; on the cost side, iron ore lacks upward momentum, and coal and coke still face downward pressure, causing the cost center of steel to continue moving down; on the policy side, recent developments primarily involve the implementation of previous policies, with no new incremental policies introduced. While crude steel reduction is confirmed, the pace of reduction is uncertain. Overall, the current steel market is characterized by high production, low inventory, low expectations, weak demand, and a weak balance. It is expected that domestic steel market prices will continue to fluctuate and adjust this week.

Lange: Since the beginning of this year, facing a complex situation with increasing external shocks and overlapping internal difficulties and challenges, macro policies have synergized their efforts. However, it must also be noted that there are still many unstable and uncertain external factors. It is necessary to solidly advance high-quality development, promote a sustained economic recovery and improvement, accelerate green technology innovation and the promotion and application of advanced green technologies, and strengthen the green foundation of new industrialization; it is necessary to promote the deep green transformation of traditional industries, actively apply advanced equipment and processes in conjunction with the implementation of policies such as large-scale equipment renewal, and accelerate the green upgrading of key industries; it is necessary to lead the high-starting-point green development of emerging industries, increase the promotion of clean energy and green products, and improve the level of resource recycling. From the black commodity futures market, black commodities continued to close lower, with the main coking coal falling over 10% for the week, coke falling over 6%, rebar and hot-rolled coil falling between 3%-4%, and iron ore falling 2.84%. Looking at the main rebar contract, it closed at 2961, down 10 points daily, 85 points lower than last week's close, with a weekly settlement price of 2982, down 81 points, showing a significant downward shift in the center of gravity. The latest open interest is 2.296 million lots, an increase of 138,000 lots from last Friday, showing a trend of increased open interest and falling prices. After effectively breaking below the 3000-point mark at the weekly level, it becomes more difficult to return to that level. The weekly moving averages are diverging downwards, indicating a downtrend, making it difficult to find a bottom. If it cannot return to the 3000-point mark this week, continue to watch for downside potential, with a reference operating range of 2876-3050. From the steel spot market perspective, on the supply side: due to the impact of profit/loss across different categories, steel mills' capacity release has shifted from weak to strong, pig iron production has slightly increased, but the performance of different product categories varies. On the demand side: due to continuous external disturbances, market speculative demand has amplified, but due to seasonal weather impacts, transaction performance in various product markets is notably unstable. On the cost side: due to slight declines in iron ore, scrap steel, and coke prices, the production cost support continues to weaken. Therefore, Lange Steel Research Center expects that under the influence of external factors, high-quality economic development, supply release shifting from weak to strong, deepening off-season effects, and continuously weakening cost support, the domestic steel market this week (June 3-6, 2025) may continue to fluctuate downwards.

Tang Song: This week, the market will enter the traditional off-season in June, with the demand side facing numerous challenges. Persistent heavy rainfall in the south and predominantly sunny and hot weather in the north will affect outdoor construction due to seasonal factors, making it difficult for end-user demand to improve significantly. Furthermore, uncertainties in US trade policy persist, which will continue to influence market sentiment, making it difficult for speculative demand for steel trade to increase. The overall release level of steel demand may remain weak but stable. From the supply perspective, some long-process blast furnaces have mid-year maintenance plans, and blast furnace operating rates may slightly decline; independent electric furnace production lines are expanding losses, and rebar production may continue to decrease, leading to an overall slight decline in steel supply. Steel inventory is expected to continue to decrease, with varying degrees of inventory reduction across major product categories. The actual supply-demand contradiction may still not accumulate. This week, domestic PMI data will be released, with expectations of a month-on-month rebound, indicating some improvement in economic activity, which will provide some support to the steel market. Overall, the fundamentals of the steel market have not significantly deteriorated, and the negative feedback mechanism is not yet clear. Last week saw a significant price drop, especially in the futures market. The rebar basis is currently above 100, at its highest level for the year, and futures valuations are significantly low, indicating an undervaluation of the futures market relative to the spot market, thus strengthening the rebar futures' resistance to further declines. In the short term, steel prices are expected to slow their decline and absorb recent drops through volatile adjustments. However, given that US Treasury bonds are maturing in June, fluctuations in the US bond market may trigger investor panic, leading to heavy risk-off sentiment in the market. Additionally, the current steel market is still in its traditional off-season, weak expectations have not been dispelled, and the market's weakening trend is unlikely to reverse in the short term, with cautious sentiment continuing. It is expected that the futures and spot prices of major steel products will remain under pressure this week, showing a weak adjustment trend. The black futures market is oscillating with a weak bias. For rebar futures, attention can be paid to the resistance level around 3020. Caution is needed regarding the risk of market readjustment around 3020, and there is still a possibility of falling below 2900 in the future.

Youfa Group Han Weidong: May's demand was neither good nor bad, with prices fluctuating downwards. June brings the off-season, with demand seasonally declining and prices fluctuating to find a bottom! But this month requires vigilance and close market monitoring due to several key factors: 1. Macroeconomically, it's the mid-year point, with policy expectations. 2. Focus on industrial policies before the end of June; the extreme production restrictions of 2021 began in the second half of the year. 3. Prices may hit bottom; the current cost reduction margin is only about one hundred yuan more, and the "negative feedback" has reached its limit. 4. Demand will see some year-on-year growth (low base last year). We've said that only high prices pose a real risk, while all truly safe opportunities stem from low prices. Patiently wait, persevere. This year is different from previous years; coal has fallen below the cost of many mines for the first time, while imports have decreased. Iron ore has fallen in price for the first time, coinciding with reduced imports and domestic production (an increase of over 50 million and 70 million tons in the previous two years). Raw material prices falling to their limits will set a lower bound for steel price declines. Another difference this year is a shift in the market's operating philosophy: no market speculation, no desire to increase inventory (including winter storage). Reduced sales will inevitably force production cuts. This philosophy has a profound impact on the market, and the contango in futures prices also suppresses the urge for hedging. In short, we must continue with steady operations, aligning procurement and production with sales, ensuring current profitability, avoiding unprofitable businesses, and weathering the storm with minimal cost until things improve!