Experts say city—April 13

My Steel: On the supply side, last week’s output of the five major steel products totaled 8.5848 million tonnes, up 69,700 tonnes from the previous week, a gain of 0.8%. The overall increase in production was mainly driven by higher output of rebar and medium plate, while hot-rolled coil output declined slightly due to temporary maintenance at some mills. Total inventories of the five major steel products stood at 18.1292 million tonnes last week, down 375,300 tonnes from the prior week, a drop of 2.0%. Although inventories continued to decline across all five product categories, the pace of destocking has slowed compared with the previous week. On the consumption front, apparent weekly consumption of the five major steel products reached 8.9601 million tonnes, down 0.3% from the prior week: construction-material consumption rose by 0.1%, while flat-product consumption fell by 0.5%. At present, steel demand has exhibited only modest fluctuations over the past week, partly due to the Qingming Festival holiday, which has temporarily moderated the upward trend. Overall, last week saw increased supply and weaker demand for the five major steel products, with the pace of inventory reduction slowing; the underlying fundamentals remain neutral to slightly weak. With regard to supply, we are still in the peak season, and given that mill margins remain healthy, there is still room for further increases in total output. On the demand side, the impact of the Qingming holiday has largely faded, and post-holiday demand is expected to rebound; however, recent widespread rainfall in many parts of southern China may limit the extent to which demand can continue to rise. As for inventories, as the dual uptick in supply and demand persists in the short term, stock levels should continue to decline, though the rate of destocking is unlikely to exceed expectations. Overall, the current steel market fundamentals show no obvious contradictions, but there is also little clear bullish momentum. Looking ahead, the ongoing rainfall in many southern regions will inevitably exert downward pressure on demand at the margin; yet, with mill margins remaining decent in the near term and limited incentive to cut production, steel prices are likely to remain in a range-bound, weakly volatile pattern—capped on the upside and supported on the downside—for the time being.
 

Steel Home: Last week, domestic steel prices remained generally stable with a slight downward bias, and price movements across regions were largely muted. Current favorable factors include: first, steel inventory continues to decline—although it has not yet returned to the level of the same period last year, overall transaction volumes have shown a moderate rebound; second, the cost of incoming shipments for traders is broadly elevated, providing some support for prices; and third, mill output has yet to recover to last year’s level, limiting supply-side pressure. On the downside, recent increases in rainfall in southern China have significantly disrupted outdoor construction activities, while iron-ore prices have continued to fall, pushing the cost center for steel lower. Overall, neither upward nor downward price drivers are particularly strong at present, suggesting that domestic steel prices this week will likely trade in a narrow range around current levels.
 

Lange: Supply side: Affected by profit-and-loss dynamics across product grades, steel mills have shifted from strong to weaker capacity release, leading to a slight decline in hot-metal output while output for individual grades has shown mixed trends. Demand side: As resumption of work accelerates across regions, regional disparities between the north and south persist, and demand for different product grades is also diverging. Cost side: With iron-ore prices edging lower, scrap-steel prices remaining stable but trending downward, and coking-coal prices holding steady, the support provided by production costs has weakened from resilient to fragile. Accordingly, Lange Steel Intelligence forecasts that, amid easing geopolitical tensions, moderate domestic economic recovery, continued implementation of pro-growth policies, steady improvements in consumption and investment, a shift from strong to weaker supply release, uneven performance in end-demand, and weakening cost support, the domestic steel market is likely to remain volatile and weak this week.
 

Tang and Song dynasties: This week, the domestic steel market has been fluctuating and adjusting, characterized by “rising supply, divergent demand, a gradual decline in inventories, and weakening costs.” Supply remains at high levels, while demand has improved marginally but is still constrained; inventory destocking continues, albeit at a slower pace. On the cost side, iron ore prices have adjusted narrowly, coking coal prices are caught in a tug-of-war over potential increases, and coking coal prices are trending lower, limiting raw-material support. From a technical perspective, key support for rebar futures lies around 3,090, with resistance concentrated near 3,132. Looking ahead to supply: blast-furnace operating rates in the long-process sector remain elevated, leaving limited room for further production increases, though hot-metal output may rise slightly. In the flat-steel segment, output of hot-rolled coil and strip remains high and is expected to stabilize; in the construction-materials segment, rebar margins have recovered somewhat, boosting mills’ production enthusiasm and leaving room for further output growth. Overall, supply is shaping up as “flat-steel output stabilizing at high levels, while construction-materials output rebounds.” Demand outlook: In the construction-materials segment, peak-season construction activity accelerated in April and infrastructure funding disbursement improved, but weak new real-estate starts are capping the extent of the rebound, resulting in marginal improvement in rebar demand. In the flat-steel segment, the manufacturing PMI has returned to expansionary territory, with increased production schedules for automobiles and home appliances, and export premiums supporting external demand, leading to a moderate pickup in hot-rolled-coil demand. Medium- and thick-plate demand is supported by shipbuilding, wind-power, and infrastructure projects, maintaining resilience; cold-rolled steel, however, is weighed down by inventory pressure—despite some support from end-user demand, purchasing appetite remains weak, limiting room for improvement. Inventory expectations: Total steel inventories are expected to continue declining, though at a slower pace. In the construction-materials segment, rebar inventories may keep declining as demand improves marginally during the peak season; in the flat-steel segment, with solid demand for hot-rolled and medium- and thick-plate products, inventory destocking will remain moderate; cold-rolled steel, hampered by weak end-user purchasing, may see stalled destocking, while wire rod inventories are declining slowly due to subdued demand. This week’s key focus areas include U.S.–Israel–Iran negotiations, first-quarter economic data, March economic data, macroeconomic policy, demand conditions, the pace of inventory destocking, whether hot-metal output has peaked, the second round of coking-coal price hikes, and potential risks such as weaker-than-expected data, evidence that demand is not recovering as anticipated, slow inventory destocking, and easing cost pressures.
 

Han Weidong: U.S.–Iran negotiations are about to begin, but the differences are too great for a resolution in the first round; we will have to wait until the two-week deadline to see any preliminary outcomes. The damage that the U.S.–Iran conflict has already inflicted on the global economy is certain—what remains uncertain are the extent, timing, and ultimate consequences. As one renowned international institution put it, there are two possible futures: one very bad, and one even worse. Faced with this massive “gray rhino” risk, we must take it extremely seriously—after all, “a gentleman does not stand beneath a crumbling wall.” Recent data show that national pig iron output continues to rise, steelmakers’ profits are improving, and iron-ore prices are beginning to return to more reasonable levels, further reducing steelmakers’ costs. It is only a matter of time before the oversupply becomes evident—so let’s avoid any speculative thinking. Looking ahead, two key factors will determine market stability: first, the complete unimpeded flow through the Strait of Hormuz; and second, steelmakers’ output falling below 2.8 million tonnes per day. Over the past year or so, steel prices have been stuck in a bottom-range fluctuation, offering little opportunity for price gains—but this period presents an excellent chance for companies to recalibrate their strategies and operational approaches. The future will certainly look different from today.
 

Zhang Guangzhi, Deputy General Manager of Marketing at Youfa Group: The above is a summary of this week’s market information:

From a macro perspective, China’s March PMI has rebounded above the 50-mark, signaling expansion, while progress on the country’s 15th Five-Year Plan is accelerating.

From the raw-material perspective, steel mills’ profit margins remained flat month-on-month, while hot-metal output rebounded to 2.39 million tonnes, supporting demand for raw materials; however, there is still room for further production increases on the supply side.

From a demand perspective, this week saw increased supply and reduced demand for the five major steel products, resulting in continued inventory destocking. Absolute inventory levels are slightly higher than the same period last year, but the pace of destocking has slowed markedly, suggesting a neutral data outlook.

Overall, the supply-and-demand dynamics for steel have weakened month-on-month, primarily reflecting a rebound in supply coupled with a slowdown in demand growth. The intrinsic momentum driving finished-product prices remains muted, leaving them subject to fluctuations in demand release and raw-material prices. Should inventory destocking proceed at a robust pace in the near term, the market may stage a modest, range-bound rebound, with hot-rolled coil trading in the 3,250–3,350 range.

Strategic recommendation: Keep an eye on rebound opportunities in the market and consider shorting on rallies. Based on the historical price dynamics of the rebar–螺纹 steel spread, you may also consider narrowing the spread.