Experts say the city—October 20

My Steel: On the supply side, last Friday, the combined output of the five major steel products reached 8.5695 million tons, a week-on-week decrease of 63,600 tons, or 0.7%. Last week, production of all five key steel varieties declined compared to the previous week, primarily driven by shrinking profit margins at steel mills and temporary maintenance activities at some plants. In terms of inventory, total inventories of the five major steel products stood at 15.8226 million tons last week, down 184,600 tons from the prior week—a decline of 1.2%. Among these, factory stocks fell by 184,600 tons week-on-week, with rebar contributing the most to this reduction. Meanwhile, social inventories also decreased by 184,600 tons, again led largely by rebar. On the demand front, consumption of the five major steel products totaled 8.7310 million tons last week, representing a significant increase of 16.2% compared to the previous week. Notably, construction material consumption rose by 35.6% week-on-week, while plate consumption climbed by 8%. Overall, apparent consumption across the five product categories showed simultaneous growth in both construction materials and plates, signaling an improvement in market demand—but overall levels remain below those seen during the same period in recent years. From the supply perspective, declining profit margins for all steel product varieties resulted in a slight drop in production last week. Additionally, several steel plants conducted short-term maintenance, further tightening supply conditions. As a result, overall supply remained relatively weak. On the demand side, while apparent consumption of the five major steel products rebounded last week, it still lagged behind pre-pandemic levels. Notably, performance varied significantly across different product types: rebar demand saw a marked recovery, with replenishment efforts gaining momentum—largely fueled by post-National Day holiday resumption of normal operations. In contrast, hot-rolled coil demand recovered more slowly, posting a relatively modest increase. Inventory levels of the five major steel products also declined last week, though the pace of destocking was generally moderate. Looking at individual product segments, although the small-sample inventory-to-sales ratio for hot-rolled coils edged down by 0.5 days week-on-week to 9.3 days—still the second-highest level in nearly seven months—market participants should remain cautious about potential pressure from ongoing inventory buildups. Meanwhile, rebar demonstrated stronger destocking dynamics, benefiting from lighter production pressures. Overall, while apparent demand for the five major steel products has begun to recover, the rebound remains weaker than in previous years. Among the key steel varieties, hot-rolled coil inventories continue to face relatively high pressure, whereas macroeconomic conditions remain broadly favorable. Moving forward, market attention will likely focus on how broader macroeconomic factors evolve and how quickly steel inventories can continue to destock. For now, steel prices are expected to fluctuate within a narrow range in the near term.

Steel Home: Currently, the primary issue facing the domestic steel market is high production levels, exacerbated by the ongoing U.S.-China trade tensions. First, steel plants are operating at near full capacity, with blast furnace and electric furnace utilization rates—tracked by Steel Home—continuing to rise and reaching their highest levels on record for this time of year. Second, steel inventories have surged from previously low or normal levels to significantly higher-than-average stockpiles, particularly in plate products, especially cold-rolled steel, which now exceed typical year-on-year levels. This has intensified supply pressures on plate products, driven by steelmakers' ongoing efforts to restructure their operations. Third, there’s a strong element of market disruption. Since October, U.S.-China tensions have escalated sharply, marking a shift from previous periods of restraint to a more assertive Chinese response. Going forward, domestic steel prices are expected to remain volatile, oscillating between gains and losses. Key factors to watch include changes in steel plant production and inventory levels, as well as the evolving dynamics of the U.S.-China trade conflict. In particular, the ability of steel producers to effectively curb output amid weakening demand and persistently high inventory levels will be critical in determining market trends.

Lange: Since the beginning of this year, in the face of a complex and challenging external environment and various difficulties in economic operations, regions and departments have earnestly implemented more proactive and effective macro policies. They have risen to the occasion, responded calmly, and made every effort to boost the economy’s steady recovery and positive momentum, firmly advancing high-quality development. Regarding the current economic situation, we must adopt a broader perspective to accurately assess the trends—particularly by examining how the implementation of the five-year plan shapes long-term economic growth; evaluating the vitality of market players through the support provided by flows of people, goods, information, and capital; and gauging our economy’s resilience in light of evolving global dynamics. On this basis, we should further strengthen our confidence, squarely address existing challenges, and strive to fulfill the annual goals for economic and social development. Looking at the black commodity futures market, prices showed mixed movements today: coking coal and coke closed slightly higher within the day, while iron ore and hot-rolled steel experienced narrow intraday declines. Meanwhile, the gains for threaded steel were virtually negligible. Analyzing the most active January threaded steel contract, it ultimately closed at 3,037 yuan per ton, up 1 point from the previous day—but down 66 points compared to last Friday’s close. The weekly settlement price stood at 3,056 yuan, marking a weekly decline of 42 points from the prior week. As of the latest data, open interest reached 2.004 million contracts, an increase of 78,000 lots from last Friday. Although funds continued to flow into the market after the holiday period, there was a sharp reduction of 35,000 contracts on Friday alone, signaling instability in investor sentiment and preventing sustained buying activity. Currently, the weekly chart shows a downward breakout, with the price hitting as low as 3,021 yuan—a level not seen since July—and closing at its weakest weekly close in over three months. This suggests that market signals remain weak, leaving open the possibility of further downside pressure toward the 3,000-yuan mark, where stronger support may emerge. On the upside, resistance is expected around the 3,080–3,100 yuan range. Overall, this week’s trading is likely to remain volatile within the 3,000–3,100 yuan band. Turning to the spot steel market, on the supply side, steelmakers have slightly increased production capacity due to favorable profit margins across product categories and anticipated policy developments, leading to a modest rise in molten iron output. However, output trends varied significantly across different steel products. On the demand side, as the peak construction season traditionally associated with “Golden October” nears its end, market transactions across various steel products have softened. Meanwhile, on the cost front, declining iron ore prices, stable but falling scrap steel prices, and steady coking coal costs have collectively weakened the overall cost support for producers. Given these factors—including expectations surrounding key policy announcements, the waning strength of the peak demand season, moderate increases in supply, slowing market activity, and weakening cost support—Lange Steel Research Center anticipates that China’s domestic steel market will likely remain weak this week.

Tang and Song Dynasties: This week, the steel market demand is expected to continue improving. As downstream construction activities gradually resume, we’re currently in the peak season for traditional building projects, which should further boost terminal demand, albeit modestly. Meanwhile, rebar futures prices remain relatively low, attracting speculative buying as investors look to scoop up bargains at these depressed levels—demand that could gain even more momentum in the coming days. Overall, total demand is likely to keep expanding. On the supply side, while some steelmakers are nearing the brink of profitability—or even experiencing losses—they haven’t yet turned fully unprofitable, meaning their incentive to cut production remains limited. Consequently, steel output across China continues to stay at a high level, putting sustained pressure on supply. At the same time, independent electric arc furnace operators are struggling with significant losses, keeping rebar production at a subdued pace. These companies are grappling with mounting cost pressures, further complicating the supply dynamics. Looking ahead, this week is expected to see steel supply remaining relatively robust while demand continues to recover. As a result, steel inventories are likely to decline slightly but steadily. From a cost perspective, the coking coal market has remained resilient recently, with prices staying elevated. Some coking plants have even begun raising their pricing due to tight supply conditions. This strong support from coking coal costs is making it difficult for overall steel production expenses to fall meaningfully, thereby capping the potential for steel prices to drop significantly. Overall, the steel market situation this week remains complex. Spot prices are anticipated to stay moderately low, with limited room for further declines. In terms of the global outlook, every move—from the Federal Reserve’s potential interest rate cuts to the progress of U.S.-China trade negotiations—is closely watched by market participants. Domestically, China will release its economic data for September, with forecasts suggesting GDP growth around 4.8% for the month. When combined with July and August figures, Q3 GDP growth is expected to hover just above 4.9%, marking a deceleration below the 5% threshold. This development may, to some extent, bolster market expectations for supportive government policies. Additionally, with the upcoming Fourth Plenary Session of the 20th Central Committee and the ongoing push for the 14th Five-Year Plan, there’s renewed optimism in the market. Meanwhile, the interplay between supply and demand persists: While supply remains elevated, demand is gradually picking up, leading to a noticeable slowdown in inventory accumulation. As a result, the overall supply-demand balance in the market is trending toward equilibrium. Given these dynamics, there are favorable conditions for a short-term rebound. However, considering the market’s growing tolerance for policy signals—and given that any major breakthroughs depend on avoiding measures like production curbs or anti-inward-spiral policies—the market is unlikely to achieve substantial gains amid persistently high output levels. Therefore, traders are advised to adopt a strategy of selling high and buying low within the 3,000–3,100 yuan range.

Han Weidong of Youfa Group: Currently, the domestic steel market is facing challenges on two fronts: First, there are international instabilities and weakening domestic expectations, compounded by the continued decline of the Wenhua Commodity Index. Second, the fundamental conditions of the steel industry have deteriorated significantly, with demand dropping sharply both month-on-month and year-on-year—yet production remains at historically high levels. This imbalance between supply and demand has triggered a steady downward spiral in prices, which have already fallen to near the lows seen in the first half of the year. Meanwhile, iron ore prices remain $10 higher, while coal prices are still several hundred dollars above their current levels, severely squeezing industry profitability. Notably, demand has been declining more significantly compared to the same period last year for three consecutive months—and this trend is expected to continue into next month as well. From the demand side, there’s no immediate solution in sight. It’s high time for steelmakers to drastically cut production in order to break free from the "involution" trap! From a pricing perspective, steel prices have already entered a low-range territory. However, holding inventory for winter stockpiling would still not be cost-effective at current levels. Unless a major unforeseen event occurs, steel prices next spring are unlikely to surpass this year’s average or even September’s average. In other words, while prices are currently quite low, without production cuts to ease the supply-demand imbalance, there’s virtually no room for either today’s prices or anticipated price levels next year. For now, the most critical task is to maintain stable operations and ensure solid operating profits—absolutely avoiding losses. Only by weathering this challenging period can we trust that time will ultimately resolve whatever issues lie ahead.