Experts say: City – March 16

My Steel: On the supply side, last Friday, the total supply of the five major steel products reached 8.2097 million tons, an increase of 237,300 tons, or 3%, compared with the previous week. With the exception of cold‑rolled and hot‑rolled steel, the output of all five major steel products rose week on week, driven primarily by the concentrated resumption of production at several steel mills following the Spring Festival—especially among short‑process steel mills, where output saw a notable uptick. On the inventory front, the total inventory of the five major steel products stood at 19.7489 million tons last week, up 228,900 tons, or 1.2%, from the prior week. Among the total inventories of the five major product categories, rebar and wire rod saw week‑on‑week increases, while inventories of the remaining products declined slightly; mill inventories rose week on week, with the bulk of the increase attributable to medium‑ and thick‑plate steel; and social inventories also increased week on week, with rebar accounting for the lion’s share of the growth. In terms of consumption, the weekly consumption of the five major steel products totaled 7.9808 million tons last week, representing a 15.4% increase from the previous week—of which construction‑material consumption surged 55.2% week on week, while sheet‑metal consumption rose 3.6% week on week. The apparent consumption of the five major steel products in the past week showed a dual‑pronged increase in both construction materials and sheet metal. On the supply side, output of the five major steel products edged higher last week; as short‑process mills resumed production in a concentrated manner, the marginal growth rate of rebar output accelerated, while hot‑rolled coil supply continued to decline due to ongoing environmental regulations in northern China. With the end of environmental production restrictions in northern China this week—and with production margins recovering—supply of the five major steel products is expected to keep rebounding. On the demand side, apparent demand rose week on week last week, with rebar demand recovering more robustly than hot‑rolled coil demand. According to a survey conducted by Century Building Research, as of March 11 (the 23rd day of the first lunar month), the resumption rate for 10,692 construction sites nationwide was 42.5%, up 19 percentage points from the previous week and down 5.2 percentage points year on year compared with the same period last lunar year; labor utilization stood at 43.9%, up 14.2 percentage points from the previous week and down 5.8 percentage points year on year; and capital availability reached 42.8%, up 7.4 percentage points from the previous week and down 0.8 percentage points year on year—underscoring the need to closely monitor subsequent demand recovery. Overall, while the supply‑demand dynamics for steel have improved only marginally and no clear inventory‑depletion phase has yet emerged, geopolitical tensions are providing support to steel costs and market sentiment. As a result, steel prices are expected to remain volatile in the near term, fluctuating within a broad range.

Steel Home: The primary driver behind last week’s rise in domestic steel prices was the Iran-related geopolitical tensions. At present, market supply and demand are broadly balanced, and downstream demand has rebounded in line with expectations. On the supply side, blast furnace utilization rates at steel mills have fluctuated slightly, while electric arc furnaces continue to resume production; it is highly likely that crude steel output in the first quarter will fall short of last year’s level. On the demand side, following the conclusion of the Two Sessions, construction projects across the country are set to enter the official execution phase. Last week, only rebar inventories increased, while stocks of other steel products saw slight declines—demand recovery has largely met expectations. In terms of foreign trade exports, export growth for both total goods and electromechanical products in January and February exceeded expectations, reflecting strong overseas demand. As for steel costs, iron ore prices have been surging, while coking coal prices have remained relatively stable, bolstering cost support for steel. The main source of uncertainty lies in the fact that the Iran-related geopolitical tensions are unlikely to ease in the short term. Overall, domestic steel prices are expected to remain volatile but generally firm this week, with close attention paid to factors such as Iran-related geopolitical developments and the pace of steel inventory destocking.

Lange: Despite the disruptions caused by volatile external conditions, the steel market has nonetheless demonstrated a degree of resilience. As the pulse‑like impact of Middle Eastern geopolitical developments on energy and chemical commodities gradually subsides, trading dynamics will increasingly revert to fundamental-driven price movements. At present, some rolling mills at steel plants in the Tangshan region are still operating at reduced capacity, with a strong willingness to support prices. From the perspective of the welded and galvanized pipe industry chain, pipe manufacturers’ inventories are declining while market inventory is experiencing a slight increase; meanwhile, the status of project funding has improved slightly year-on-year, meaning that overall industry pressure remains relatively mild. However, as raw materials under the new settlement cycle agreements are delivered one after another, the downward trend in inventories remains unstable, and welded and galvanized pipe prices are fluctuating within a narrow range while flexibly probing higher levels. Domestic welded pipe and galvanized pipe prices are expected to follow market trends, remaining stable with a slight upward bias.

Tang and Song Dynasties: This week, the market has entered a critical verification phase for the peak season. With supply fully resuming and demand steadily recovering, prices are undergoing rigorous testing. Coupled with the refined implementation of policies announced during the Two Sessions and ongoing negotiations over raw material costs, a complex interplay of bullish and bearish factors is constraining price movements, leaving steel prices poised to remain in a range-bound, slightly stronger trading pattern. On the supply side, output is showing a steady upward trend. Following the conclusion of the Two Sessions, production restrictions on blast furnaces in Tangshan and other regions were completely lifted, prompting a concentrated resumption of operations at long-process steel mills. Pig iron output has continued to climb, driving overall capacity utilization rates higher; meanwhile, as electric furnace profits recover and underlying demand picks up, short-process steel mills are accelerating their return to production, maintaining high operating rates. With significant room still remaining for further increases in rebar and wire rod output, total steel supply is expected to continue expanding. On the demand side, end‑user demand continues to rebound. As temperatures across the country warm up, infrastructure projects and construction sites are ramping up their resumption of work, leading to stronger release of essential demand. While the real estate market remains focused on ensuring timely project completions, new construction starts have remained relatively weak, weighing on overall building materials demand. Downstream buyers are primarily replenishing inventories based on actual needs, with speculative sentiment gradually improving but remaining cautious. Given ongoing geopolitical uncertainties in the international arena—and with traders’ risk‑averse mindset not yet fully abated—overall demand is taking shape as “building materials demand is picking up speed, while sheet metal products are experiencing steady recovery.” In terms of inventory, steel mill output continues to rise, while the pace of demand recovery may accelerate, resulting in a slight increase in total steel inventories. Social inventories are still trending upward, though mill inventories may see a small decline as shipments improve, gradually easing the pressure of accumulating building materials stockpiles. Sheet metal inventories are likely to undergo minor adjustments, and the overall inventory structure continues to optimize. On the cost front, after the first round of coking coal price cuts took effect, market sentiment has shifted toward caution, with prices gradually stabilizing. Iron ore prices are following the pace of steel mill resumption, supported by seasonal demand rebounds—and compounded by fluctuations in shipments from overseas mines—leading to volatile yet generally strong pricing. Meanwhile, ongoing geopolitical tensions continue to disrupt energy markets, keeping oil prices and freight rates elevated and providing robust, albeit temporary, cost support for steel prices. At the macro level, policy uncertainty has eased following the conclusion of the Two Sessions, as infrastructure investment and manufacturing recovery help bolster market expectations. Rising energy costs driven by overseas geopolitical conflicts are providing bottom‑up support for steel prices. However, with full supply resumption still looming and steel inventories remaining relatively high, the market’s sustained rebound may face some pressure. In the short term, steel prices are expected to remain range-bound with a slight upward bias; once peak‑season demand is further validated, the direction will become clearer. This week, major steel product prices are likely to trade in a range-bound, slightly stronger pattern. Supporting factors include the refined implementation of post‑Two Sessions policies aimed at stabilizing growth, which underpin macroeconomic expectations; plus the continued high levels of energy prices, which strengthen cost support. Constraints include the lingering pressure of full supply resumption and the fact that steel inventories remain elevated, limiting the room for price increases. Overall, while short‑term steel prices still have upward momentum, the extent of any gains is likely to be capped. For rebar futures, watch for support around 3,100, while resistance lies near 3,170. This week, key areas to monitor include: the release of January–February national economic performance data; the Federal Reserve’s March interest rate decision; developments in the geopolitical situation in the Strait of Hormuz in the Middle East; and the progress of domestic steel demand recovery.

Han Weidong: After this year’s Spring Festival, market demand rebounded beyond expectations, and total steel inventories are on the verge of peaking—yet steel prices remain at low levels. Yesterday, iron ore prices broke through last year’s highs, but steel mills’ profitability remains relatively weak, reflecting a generally cautious sentiment across the industry. Last year, a sharp rally in precious metals pushed the commodity index higher; this year, petrochemical products have once again surged, further driving up commodity prices. According to institutional forecasts, the PPI—which has been negative for more than 40 consecutive months—may finally turn positive in the second quarter of this year. However, this round of price increases is primarily driven by geopolitical developments related to Iran, and a return to normalcy is inevitable. This is precisely where the potential risks lie. Once shipping through the Strait of Hormuz resumes, those risks could quickly materialize. Looking back to early 2022, when the Russia–Ukraine conflict triggered a dramatic surge in commodity prices, prices then plunged sharply in the second half of the year—Tangshan strip steel prices even plummeted by 1,700 yuan per ton. Fortunately, steel prices are now hovering near their bottom, meaning risks are relatively manageable; however, we need to be especially vigilant about this round of commodity price spikes, which have been fueled by crude oil and chemical products. The primary risk in the black metals sector is concentrated in iron ore: its supply‑demand dynamics are now strikingly clear, and the notion of “decoupling” is simply unrealistic. Once relevant negotiations are finalized, iron ore prices will likely revert to a more rational level.