Experts say city—December 15th

My Steel: On the supply side, last Friday, the supply of the five major steel products reached 8.0622 million tons, down 2.273 million tons from the previous week, representing a decrease of 2.7%. This week, steel production declined somewhat, with particularly noticeable drops in rebar and wire rod output. Last Friday, the total inventory of the five major steel products stood at 13.3209 million tons, down 335,000 tons from the previous week, a decline of 2.5%. The total inventory of the five major product categories decreased this week, and inventory trends for construction materials and sheet products were consistent: both construction materials and sheets showed a destocking trend, with construction materials declining by 2.813 million tons and sheets declining by 537,000 tons. On the consumption side, last week's weekly consumption of the five major product categories totaled 8.3972 million tons, of which construction materials consumption fell by 5.7% from the previous week, and sheet consumption fell by 1.3%. Among the five major product categories, the consumption structure of construction materials and sheets remained consistent. As the off-season gradually deepens, there is limited room for further improvement in demand for rebar and hot-rolled coils. As demand weakens seasonally going forward, steel inventory pressure may continue to build up. Regarding rebar, some steel mills have proactively reduced production to maintain a balance between production and sales; currently, supply levels are at an extremely low point, putting little pressure on supply. On the consumption side, last week’s consumption continued to decline compared to the previous week, and due to seasonal factors, consumption is expected to keep falling in the coming period. As for hot-rolled coils, this week is expected to see a slight pace of destocking, with modest declines in apparent demand. Overall, the fundamental supply-demand imbalance has not yet become evident. However, current production levels remain high, significantly increasing pressure on mill inventories. Once demand further weakens during the off-season, inventory pressure will intensify even more.

Steel Home: Last week, domestic steel prices generally saw a slight decline. The primary reason for the drop in steel prices was weak market transactions. According to survey data from the Steel Home website, the average weekly trading volume of major steel products showed a downward trend both year-on-year and month-on-month. The traditional off-season had a significant impact on the market. On the supply side, trends diverged: inventories of construction steel continued to decline, linked to reduced production by steel mills; meanwhile, inventories of various plate products remained at high levels and fluctuated considerably, putting some pressure on supply. On the cost side, support weakened—recently, coking coal and coke prices have mostly been declining, with the second round of coke price cuts now fully implemented. Although iron ore prices had previously shown a relatively strong trend, they also began to fall last week. From the policy perspective, there was limited impetus. Last week, the Central Political Bureau and the Central Economic Work Conference were held; the focus of these meetings was on medium- and long-term impacts, with little immediate effect. At the export end, enhanced management measures—including the implementation of an export licensing system for steel—will help standardize the order of steel exports but will likely have some short-term impact on exports. It is expected that this week, domestic steel prices will continue to show a general trend of slight declines.

Lange: Next year, China’s economy should adhere to the principle of seeking progress while maintaining stability and improving quality and efficiency. We need to leverage the synergistic effects of both existing and new policies, step up counter-cyclical and cross-cyclical adjustments, and enhance the effectiveness of macroeconomic governance. We must continue to implement a more proactive fiscal policy, maintaining an appropriate level of fiscal deficit, total debt, and overall spending, while optimizing the structure of fiscal expenditures. We should also continue to pursue a moderately accommodative monetary policy, taking the promotion of stable economic growth and a reasonable rebound in prices as key considerations. We need to flexibly and efficiently employ various policy tools, such as reserve requirement ratio reductions and interest rate cuts, to ensure ample liquidity, smooth the transmission mechanism of monetary policy, and guide financial institutions to intensify support for key areas including expanding domestic demand, technological innovation, and small and medium-sized enterprises. We must strengthen the consistency and effectiveness of macroeconomic policies to boost public confidence. Looking at the black commodity futures market, black commodities as a whole closed lower. The main contracts for coking coal and coke fell by over 4% and 3%, respectively, with weekly declines exceeding 12% and 9%, leading the entire commodity futures market lower. Rebar, hot-rolled coil, and iron ore saw relatively smaller declines but remained in a weak trading range. Taking the main rebar contract 05 as an example, it ultimately closed at 3,060 yuan, down 27 points from the previous day, and 97 points lower than last Friday’s closing price. Its weekly settlement price was 3,098 yuan, down 62 points. The latest open interest stood at 1.6 million contracts, an increase of 125,000 contracts from last Friday. Although there was a rapid rebound during the week, the market ultimately reversed course and hit a new weekly low, signaling weakening momentum. Both the weekly and daily price trends are trending downward, and technically speaking, further declines cannot be ruled out. This week, the key support level for rebar is around the 3,000-yuan mark, with a reference trading range of 2,990–3,117 yuan. In terms of the spot steel market, on the supply side, due to profit-and-loss impacts across different product categories, steel mills have continued to reduce their capacity release, resulting in a slight decrease in molten iron production, while output of specific products has shown mixed performance. On the demand side, as the winter effect continues to intensify, terminal demand exhibits seasonal fluctuations; construction materials show slightly stronger performance, while sheet metal production has noticeably contracted. On the cost side, with iron ore prices remaining stable yet declining slightly, scrap steel prices showing a steady downward trend, and coking coal prices staying relatively stable, the support provided by production costs has weakened somewhat. Therefore, the Lange Steel Research Center forecasts that, under the influence of next year’s focus on improving economic quality and efficiency, the deepening winter effect, continued weakening of supply releases, significantly unstable market transactions, and diminishing cost support, this week’s domestic steel market is likely to experience volatile declines.

Tang and Song: This week, December falls within the traditional off-season for demand. Some regions in southern China are experiencing rainfall, while many areas in northern China are seeing snowfall, leading to a further drop in overall temperatures. Affected by seasonal factors, end-demand continues to weaken. In the north, demand for construction materials has significantly contracted, and construction progress in southern regions has also slowed down somewhat. As a result, overall demand for construction steel continues to decline. On the manufacturing side, although production in some industries remains relatively stable, overall demand growth remains weak. Against the backdrop of the off-season, manufacturing’s demand for steel can hardly serve as the sole driver of recovery, making it difficult to reverse the overall sluggishness in the steel market. On the supply side, despite maintenance activities at some steel mills, driven by factors such as profitability, several mills continue to ramp up capacity release. Independent electric arc furnace profits have rebounded, resulting in a slight increase in rebar production. We expect supply to remain relatively high this week. In terms of inventory, with supply remaining stable and demand weakening, the pace of inventory reduction has slowed down. On the cost front, iron ore prices have edged down slightly, but supply remains relatively stable. Global iron ore supply is relatively ample, and shipment volumes from major mines have not changed significantly. If demand does not improve markedly in the coming period, iron ore prices may continue to fluctuate at lower levels. Coking Coal: Coking coal prices have fallen slightly, while coking plants maintain steady operating rates. Weak downstream steel prices are squeezing raw material profits, and falling coal prices on the cost side have pushed coking coal price centers downward, triggering destocking across all links in the chain. The second round of price cuts has taken effect, leaving the short-term outlook relatively weak. Overall cost support is gradually waning. Looking at the broader picture, the market has recently reported that the real estate sector may implement interest-subsidy policies. Industry insiders generally believe that if these policies are formally implemented, they will effectively reduce borrowers’ loan burdens, thereby stimulating latent housing demand. However, from the announcement of the real estate interest-subsidy policy to the actual release of demand, there will be a certain time lag, so its stimulative effect on steel demand in the short term will not be obvious. With the recent conclusion of the Central Economic Work Conference and the Federal Reserve’s interest-rate meeting, although “anti-involution” measures and new regulations on steel export licenses have been hotly debated, macroeconomic narratives have gradually cooled down, and trading logic has returned to focusing on supply and demand fundamentals. Currently, we are in the seasonal off-season for demand; demand for the five major steel products has declined for three consecutive weeks, and supply elasticity exceeds demand. Meanwhile, port inventories of iron ore have surpassed 150 million tons, hitting a new high for the year. The second round of coking coal price cuts has begun, further weakening cost support. We expect steel prices to continue their volatile, weak adjustment trend. Given the large basis between futures and spot prices—with futures trading at a significant discount to spot prices—we anticipate that the downward space for futures contracts will narrow. For rebar futures, watch closely for support around 3,000 yuan; resistance lies near 3,090 yuan.

Han Weidong, Youfa Group: As macro policies take effect, the steel market is set to enter a phase dominated by fundamentals. Over the past three winters, winter stockpiling has consistently resulted in losses, and for the past year, market conditions have been characterized by narrow fluctuations with little elasticity. This year may well be the one with the lowest willingness to stockpile in many years. Yet, many large steel mills remain hopeful and, 20 days ahead of schedule, have already raised prices for January of next year by 100 yuan, injecting a touch of humor into an otherwise subdued market. Demand in the market has now declined year-on-year for five consecutive months. In the past, when supply exceeded demand, it was merely “supply excess”; demand remained remarkably resilient. But now that demand has weakened, the underlying contradictions have intensified. The Central Economic Work Conference called for “promoting investment to halt its decline and stabilize,” and we’ll have to wait until investment turns positive before we can feel confident. The conference also urged “deepening efforts to address involutionary competition,” and we’ll need to wait until these measures start yielding tangible results before we can breathe easy. Currently, costs supporting steel prices continue to fall, which will allow steel prices to experience a slow, defensive decline. Recently, the market has faced two major challenges: first, capital market volatility triggered by the Bank of Japan’s interest-rate hike; and second, fluctuations caused by the shift in social inventories—from declining to rising. With prices currently hovering around levels that lack confidence ahead of the Spring Festival, let’s continue to operate prudently and stay the course.