Experts say: City—April 27

My Steel: On the supply side, last week’s total output of the five major steel product categories reached 8.6322 million tonnes, up 78,900 tonnes, or 0.9%, from the previous week. With marginal improvement in steel margins last week, both long-product and flat-product output increased, with no signs of structural divergence. Total inventory of the five major steel products stood at 17.0256 million tonnes, down 621,200 tonnes, or 3.5%, from the prior week. Inventory continued to decline across all five categories, with the pace of destocking accelerating compared with the previous week—primarily due to the approaching May Day holiday, which has spurred some restocking demand among downstream users. On the consumption front, last week’s apparent weekly consumption of the five major steel product categories totaled 9.2534 million tonnes, up 2.4% from the previous week, with construction-material consumption rising by 6% and flat-product consumption increasing by 0.3%. As the May Day holiday draws near and the peak season persists, steel demand continued to pick up marginally ahead of the holiday, further accelerating inventory drawdown. Overall, last week saw simultaneous increases in both supply and demand for the five major steel product categories, with total inventory continuing to decline and underlying fundamentals remaining neutral to slightly bullish. On the supply side, steel mills are currently still enjoying reasonable profit margins, and given seasonal patterns, short-term steel output is likely to continue rising modestly, thereby marginally intensifying supply pressure. On the demand side, this week marks the final week before the May Day holiday; the pulse-like nature of demand may persist, but there is limited room for further gains. On the inventory front, as the current dual-upward trend in steel supply and demand remains in place, inventories should continue to decline in the near term, though the pace of destocking is unlikely to exceed typical seasonal levels. Overall, steel fundamentals are currently in a destocking cycle with no obvious contradictions; meanwhile, steel output is expected to rise steadily, so the cost-support rationale remains intact. However, given that demand is likely to cap price gains, upward pressure on prices will face hedging constraints, meaning the foundation for sustained sharp increases is not solid and prices are more likely to remain moderately strong in the short term.

Steel Home: Currently, the domestic steel market is generally on the rise, with rebar and hot-rolled coil—both closely tied to futures trading—showing particularly strong performance. Looking at recent market dynamics: first, rising iron ore and coking coal prices have pushed up steel production costs, strengthening mills’ willingness to support prices; second, steel inventories continue to decline, bringing supply and demand into near balance and maintaining a relatively positive market sentiment among traders; third, ahead of the May Day holiday, end-users are showing some restocking demand, leading to sustained improvement in trading volumes; and fourth, although mill output has been gradually recovering, it remains broadly below the level of the same period last year, meaning supply pressure is not significant. On the downside, declining steel exports will increase domestic supply pressure, while increased rainfall in some regions is likely to somewhat hinder outdoor construction activities. Overall, domestic steel prices are expected to continue rising slightly this week.

Lange: Supply side: Affected by profit-and-loss dynamics across product grades, steel mills have continued to ramp up capacity release, leading to a modest increase in hot-metal output, while output for individual grades has shown mixed performance. Demand side: With the steady-growth policies taking effect and work resumption accelerating across regions, end-user demand has gradually picked up; however, transaction strength varies significantly among different product grades. Cost side: A slight rise in iron-ore prices, stable scrap-steel prices, and a modest increase in coking-coal prices have strengthened cost support, shifting from moderate to robust. Accordingly, Lange Steel Intelligence forecasts that, amid renewed geopolitical tensions, steady domestic economic recovery, a rebound in manufacturing, resilient foreign trade, a moderate consumer recovery, continued expansion of supply, uneven market activity, and strengthening cost support, the domestic steel market is likely to remain volatile with modest gains this week.

Tang and Song dynasties: This week, the domestic steel market is expected to continue its volatile yet generally strong performance, characterized by “stable supply, improving demand, declining inventories, and cost support.” On the supply side, conditions remain broadly stable; on the demand side, construction-materials demand is modestly recovering, while flat-steel demand stays firm at elevated levels. Inventories are steadily declining, iron-ore prices are providing support to steel prices, and there are expectations for a third round of coking-coal price hikes, which will further strengthen the marginal cost-support effect. With fundamentals improving marginally and supportive domestic-demand expansion policies in place, downside support for steel prices remains robust; however, investors should be wary of the risk of a pullback following overly rapid price increases. Overall, the market is likely to remain range-bound with a slightly bullish bias. From a technical perspective, key support for rebar futures lies around 3,160, while resistance is concentrated near 3,220. This week’s key areas of focus include: developments in the second round of U.S.–Iran negotiations; the strength of demand release; the pace of inventory destocking; steelmakers’ profit margins; export performance; expectations for a third round of coking-coal price hikes; pre-holiday restocking ahead of the May Day holiday; the specific pricing mechanism and contract terms under the China–Australia iron-ore agreement; as well as geopolitical risks, weaker-than-expected demand release, slower inventory destocking, and less-than-expected pre-holiday restocking.

Han Weidong: Starting in March—and particularly since April—market demand has improved more than expected. From August last year through February this year, demand consistently declined by about 5% year on year; March saw demand remain flat, and April posted a year-on-year increase, both of which exceeded expectations. At present, it appears highly likely that this improvement stems from a supply-demand mismatch. However, if the upward trend persists beyond May, it would signal a dramatic shift in the nature of market demand. Several surprising developments have emerged in the macro environment: the turnaround of the PPI to positive territory, a PMI reading above 50, and the rebound in fixed-asset investment—all represent inflection-point shifts that warrant close monitoring for sustainability. At present, the prevailing market outlook remains one of volatile, choppy trading; unless supply-side policies aimed at curbing “involution” are introduced in due course, any rally is likely to run its course by the time it reaches a peak. The current market landscape is being reshaped by unprecedented changes unseen in a century, so investors must adopt a prudent, risk-managed approach and focus on capturing profits amid this volatile environment. It has now been two years since the government first called for measures to combat “involution” in the steel industry—back in June. Coupled with the recent series of national policy documents on energy conservation and carbon reduction, there is a strong likelihood that concrete action will be taken this year, finally bringing a glimmer of hope to the steel sector.

Zhang Guangzhi, Deputy General Manager of Marketing at Youfa Group: 1. Domestically, the macro narrative remains centered on peaking carbon emissions and achieving carbon neutrality; however, the specific implementation details have yet to be officially announced, which bodes well for the steel market in the long term but has only a short-term impact on market sentiment. As for the news regarding the export-license meeting, no outcome has been released, making it impossible to assess its implications—though the overall tone of this news is bearish.

2. On the supply-and-demand front, Mysteel’s weekly pig iron data show 239.32 tonnes per day, a slight month-on-month decline and a year-on-year decrease of 5.03 tonnes per day. Rebar inventory drawdowns are lower than the same period last year, while hot-rolled coil inventory drawdowns are higher than last year. The May delivery month for the 2605 rebar contract has now begun; given the current off-peak electricity cost of RMB 3,150, it is widely expected that the delivery price will not exceed this off-peak rate.

Overall assessment: macro sentiment is favorable, with expectations of inventory replenishment on the rise; pre-holiday restocking demand remains strong, and market participants are inclined to support prices. Consequently, the black-steel market is expected to trade in a generally strong but volatile range this week.