Experts say: City—April 20

My Steel: On the supply side, last week’s output of the five major steel products totaled 8.5533 million tonnes, down 31,500 tonnes from the previous week. This period saw a divergence in the product mix of steel output, with declines primarily in rebar and medium-to-thick plate production, while wire rod and hot-rolled coil output increased. Total inventories of the five major steel products stood at 17.6468 million tonnes last week, a weekly decline of 482,400 tonnes, or 2.7%. Inventories of all five major product categories fell, with building materials and flat products showing consistent destocking trends: building-materials inventories decreased by 361,300 tonnes, and flat-product inventories by 121,100 tonnes. On the consumption front, weekly consumption of the five major steel products reached 9.0357 million tonnes, with building-materials consumption up 4.2% month-on-month and flat-product consumption down 1% month-on-month. Among the five major product categories, consumption patterns for building materials and flat products diverged. Currently, rebar and hot-rolled coil remain in their peak consumption season; however, given the limited elasticity in both segments, supply pressure on rebar is lower than that on hot-rolled coil. At present, black-steel pricing continues to be anchored at the raw-material end, with the resolution of coking-coal delivery issues and the restoration of iron-ore inventory liquidity already factored into prices, providing strong support for steel prices at the lower end. From a fundamental perspective, with steel mills still enjoying reasonable profit margins, hot-rolled-coil output is expected to continue rising this week, suggesting that the black-steel sector will likely remain in a price-increase cycle in the near term, further exacerbating supply–demand imbalances. Attention should be paid to the pressure that rising output may place on the pace of inventory destocking.

Steel Home: Last week, domestic steel prices mostly edged higher, with trading activity showing a slight improvement compared with the previous week. Positive factors include: first, Q1 GDP grew 5% year on year, slightly exceeding expectations, particularly driven by robust growth in industrial production and fixed-asset investment, which bodes well for demand; second, crude steel and finished steel output declined year on year in Q1, and with inventories continuing to fall recently, supply and demand remain broadly balanced; third, most steelmakers are holding inventory at relatively high cost levels, providing some cost-based support. Negative factors, meanwhile, mainly stem from declining exports, which are putting additional pressure on domestic supply, as well as frequent rainy weather in southern China, which has somewhat hampered outdoor construction activities. Going forward, domestic steel prices are expected to continue rising modestly this week.

Lange: Last week, the impact of Middle East geopolitical developments on oil prices and black-steel commodity markets continued to wane. However, raw-material prices for coking coal and iron ore staged a temporary bottoming-out, while the second round of price hikes for coke remains in the negotiation and implementation phase. In addition, stronger-than-expected macroeconomic data, including GDP figures released mid-week, fueled a synchronized rally in the black-steel sector. That said, welded and galvanized pipe products have been somewhat on the defensive due to uncertain timing of raw-material deliveries under upstream steel mill supply agreements. Earlier in the week, tight spot demand from pipe mills and constrained availability of certain specifications had already intensified competition for resources; now, delayed arrivals of raw-material orders have further exacerbated this dynamic. Meanwhile, as the room for incremental demand growth continues to shrink, market shipment pressure has mounted as the week draws to a close—yet rising costs are eroding margins, leaving both upward and downward price movements constrained. Going forward, domestic prices for welded and galvanized pipes are expected to remain largely subject to flexible, ad-hoc adjustments.

Tang and Song dynasties: This week, the domestic steel market is expected to trade in a volatile yet firm range, characterized by stable supply, improving demand, continued inventory drawdown, and cost support. On the supply side, conditions remain broadly stable; on the demand side, construction-materials demand shows marginal improvement while flat-steel demand remains resilient, inventories continue to decline, and iron-ore prices provide cost support, with the second round of coking-coal price hikes now fully implemented. With fundamentals marginally improving and macroeconomic expectations recovering, steel prices are well supported on the downside, though strong demand constraints cap upside potential, suggesting a range-bound, slightly higher–centered trading pattern. From a technical perspective, key support for rebar futures lies around 3,100, while resistance is concentrated near 3,160. Supply outlook: Blast-furnace operating rates in the long-process sector remain elevated, with hot-metal output nearing its upper end; further capacity expansion is limited, so output is expected to fluctuate only modestly. In the flat-steel segment, hot-rolled coil production is at a year-to-date high, but there is little incentive to push output higher, so it is likely to stabilize at current levels. For construction materials, as profit margins recover, steelmakers are more inclined to resume production, leaving some room for a small uptick in output. Overall, supply is characterized by stable, high-level flat-steel output and a modest rebound in construction-materials production, keeping overall supply pressure manageable. Demand outlook: In the construction-materials segment, April’s peak construction season is picking up pace, with improved funding availability for infrastructure projects, which should help sustain the rebound in apparent rebar demand. However, weak new real-estate starts continue to cap the extent of the demand recovery, meaning overall improvement will be marginal and limited in magnitude. In the flat-steel segment, the manufacturing PMI remains in expansionary territory, with seasonal increases in auto and home-appliance production schedules, and export premiums for hot-rolled coil continue to underpin external-demand resilience. Medium- and thick-gauge plate benefits from demand in shipbuilding, wind power, and infrastructure projects, maintaining strong resilience; cold-rolled end-user demand is supported, but constrained by inventory pressures, resulting in tepid purchasing activity and limited room for improvement. Inventory outlook: Total steel inventories are expected to keep declining. In the construction-materials segment, robust seasonal demand during the peak season should ensure continued synchronized destocking at both mill and social warehouses, further easing inventory pressure. Flat-steel demand is diverging: hot-rolled coil continues to benefit from resilient external demand, while medium- and thick-gauge plate still enjoys solid support; social inventories are expected to decline slightly this week, helping maintain a moderate pace of overall inventory reduction. Cold-rolled inventory, however, remains sluggish due to lackluster downstream purchasing, so destocking is likely to be slower this week than for hot-rolled and medium- and thick-gauge plate. Macroeconomic outlook: Overseas: Key attention should be paid to Fed statements and Chairman Powell’s comments on the path to rate cuts, inflation, and the Middle East situation, as these will directly influence the U.S. dollar index and commodity trends. Inflation divergence between the U.S. and Europe persists; U.S. April CPI and Eurozone trade balance are critical data points, and vigilance is needed against the risk of a second-round inflationary surge driven by a rebound in energy prices. With the U.S.–Iran nuclear agreement nearing expiration, oil-price volatility will directly affect expectations for coking-coal costs, and geopolitical risk premiums could rise. Domestically: Focus should be on the release of the Loan Prime Rate (LPR), particularly whether it follows earlier policy-rate cuts, as changes in the LPR will directly impact market liquidity and funding-cost expectations. Also monitor the People’s Bank of China’s rollover of medium-term lending facility (MLF) operations and any adjustments to the MLF rate; a reduction in the MLF rate would help lower corporate financing costs and boost market confidence. This week, key watchpoints include: the expiration of the U.S.–Iran agreement and associated geopolitical risks; international crude-oil price trends; the LPR announcement date; the strength of demand release; the pace of inventory destocking; whether hot-metal output has peaked; whether the second round of coking-coal price hikes has been implemented; the timing of the lifting of Tangshan’s pollution-warning restrictions and the actual enforcement of steelmakers’ production curbs during that period; and the risk of a breakdown in U.S.–Iran talks, an unexpected extension of Tangshan’s production limits, or obstacles to the coking-coal price hike—potential risks that could derail the recovery if demand-side validation falls short.

Han Weidong: Let’s review the current market fundamentals: On the macro level, key indicators such as the PMI returning above 50, the PPI turning positive, and fixed-asset investment posting growth have all improved simultaneously—albeit in a fragile and hard-won manner. Market demand has improved markedly, ending the year-on-year decline that had persisted since August of last year and signaling stabilization. Since October of last year, the monthly average price of Tangshan strip steel has fluctuated narrowly around RMB 3,150; yesterday it rebounded to RMB 3,200—a level that represents both the upper bound of the past six months’ range and the full-year average monthly price for last year. Meanwhile, the conflict in the Middle East has entered its second phase of ceasefire negotiations, with just a few days remaining before the two-week deadline, presenting a rare moment of relative calm. The National Bureau of Statistics has reported a substantial drop in crude steel output in the first quarter; this data warrants careful analysis, as it at least suggests that no policy-driven production restrictions are likely to be introduced in the near term, given that current output levels are already “satisfactory.” For now, the steel market remains in a volatile, choppy state, with narrowing price swings and little room for speculative gains. Before the peak season ends, companies should work to reduce excess inventory and maintain prudent, well-balanced stock levels. This is the optimal time for firms to transform their business models and strengthen their core competitiveness. Since 2022, the steel industry has consistently operated at very low profit margins, regardless of whether steel prices have hovered above RMB 5,000, RMB 4,000, or even RMB 3,000—primarily due to operational inefficiencies, with steel-trading enterprises facing even greater challenges.

Zhang Guangzhi, Deputy General Manager of Marketing at Youfa Group: The U.S.–Iran situation has eased, but traffic through the Strait of Hormuz has remained volatile, leading to a decline in oil prices and a rise in gold prices, as financial markets gradually move away from war-related narratives. Whether another dramatic shift will occur remains to be seen. Nonetheless, the end of hostilities is generally positive for the market. Overall, the struggle over the strait persists, with strong cost support keeping steel mills firm on pricing. Last week, market conditions initially weakened before rebounding; cost support combined with news of production restrictions in Tangshan provided additional upward pressure, driving prices higher this week. On the supply-and-demand front, rebar and coil output has edged up slightly but remains below last year’s level, with inventory destocking proceeding at a normal pace. Some regions are experiencing shortages of certain specifications, while hot-rolled coil stocks are relatively high year on year. Meanwhile, export orders for slab have increased, bolstering steelmakers’ pricing resilience. Overall, supply and demand have not changed significantly. On the raw-materials side, negotiations between iron-ore suppliers and BHP have concluded, and the second round of coking-coal price hikes has been implemented, providing robust support around 750 for iron ore. April remains a peak demand season, and pre–May Day restocking is still underway, underpinned by firm cost support, suggesting a likely range-bound, bullish trend. Given that output is lower than the same period last year, coupled with pre-holiday restocking and the prospect of an end to the conflict, inventories are likely to decline at an accelerated month-on-month rate in the near term, with demand remaining strong—making it possible that futures could climb as high as 3,180.