Experts say city—May 11

My Steel: On the supply side, last week the combined output of the five major steel product categories totaled 8.3983 million tonnes, down 150,000 tonnes from the previous week. The product mix remained stable this period, with declines in rebar and hot-rolled coil output offset by a modest increase in cold-rolled coil production. Total inventories of the five major steel products stood at 16.4658 million tonnes, a weekly decline of 13,300 tonnes, or 0.1%. While overall inventories of the five major categories edged lower, trends diverged between construction materials and flat-rolled products: construction-material inventories fell by 30,700 tonnes, whereas flat-rolled inventories rose by 17,400 tonnes. On the consumption front, weekly consumption of the five major categories reached 8.4116 million tonnes, with construction-material consumption down 16.1% and flat-rolled-product consumption down 2.4% from the prior week. Among the five major categories, consumption patterns for construction materials and flat-rolled products have begun to diverge. The peak season for rebar and hot-rolled coil consumption is now drawing to a close; given the limited elasticity in demand for these products, coupled with effective production controls on hot-rolled coil and persistently wide domestic–international price differentials, hot-rolled-coil prices have risen sharply recently, driven by parallel increases in raw-material costs. At present, the fundamental supply–demand balance for finished steel remains relatively tight; provided that pig iron output can be maintained at current levels, the cost-support rationale remains strong as long as the geopolitical conflict has not yet been fundamentally resolved. Going forward, we expect that once the holiday-related lull subsides, both supply and demand for finished steel will see quarter-on-quarter improvements, keeping prices in a high-range trading range. Key areas of focus will be the outcome of U.S.–Iran negotiations and the evolution of domestic–international price differentials.

Steel Home: Following the holiday, the steel market has gotten off to a strong start, with prices for most major steel grades rising across the board—some markets seeing increases of more than RMB 100 per ton. The primary drivers are pent-up restocking demand from downstream users and improving market sentiment. Recent market dynamics point to three key factors: first, both mill production costs and inbound logistics costs have risen, providing solid cost support; second, post-holiday inventory build-up has been limited, leading to better transaction activity and smoother overall shipments; and third, broad-based gains in the stock and futures markets have boosted market confidence. With steel prices now higher, two issues warrant close attention: first, after consecutive price hikes, traders may become more inclined to sell to lock in profits, raising questions about whether short-term trading volumes can sustain; and second, whether rising prices will put additional pressure on supply. Overall, domestic steel prices are expected to continue trending modestly higher this week.

Lange: Against the backdrop of persistent global inflationary stickiness, volatile high energy prices, a steady domestic economic recovery, sustained momentum in the repair of domestic demand, a continued slowdown in supply release, a significant increase in market turnover, and strong cost support, the domestic steel market is expected to continue its volatile, modestly rising trend this week.

Tang and Song dynasties: This week, the domestic steel market is expected to trade in a generally strong but volatile range, characterized by “moderate supply growth, marginally weakening demand, limited inventory accumulation pressure, and firm cost support.” Plate products are seeing relatively balanced supply and demand, with declining inventories providing price resilience; in contrast, construction steel is being weighed down by seasonal factors, increasing the risk of demand peaking and then retreating, which could slow inventory destocking and cap price performance. For now, the market’s bullish stance remains intact, warranting a generally strong-but-volatile outlook; however, vigilance is needed regarding the potential slowdown in end-user demand and the weakening momentum as the peak season draws to a close, which may limit upside room. From a technical perspective, key support for rebar futures lies around 3,230, while resistance is clustered near 3,330. Supply outlook: Profit margins at long-process steelmakers continue to recover, sustaining high production enthusiasm; blast-furnace utilization rates are already at relatively elevated levels seen in recent years, leaving limited room for further increases, so output of hot-rolled and cold-rolled plate is expected to remain stable. Meanwhile, independent electric-arc-furnace operators, benefiting from the rebound in short-process cost competitiveness, are likely to see month-on-month gains in operating rates, driving a corresponding pickup in rebar output. Overall, supply expansion will be moderate, making significant broad-based increases unlikely. Demand outlook: Domestic demand for plate and strip products is poised for a noticeable recovery; however, widespread heavy rainfall in southern China will hamper outdoor construction activities, potentially pushing rebar demand into its peak phase with limited room for further gains going forward. During the week, rigid steel demand may return to normal levels, but signs of the approaching off-season will gradually emerge. Inventory expectations: Total steel inventories, after building up over the holiday period, may decline again, though with pronounced differentiation across product categories. Construction steel inventories are likely to fall slowly as rainy weather delays end-user purchasing; by contrast, plate inventories could see simultaneous declines in both social and mill-held stocks. This week’s key focus areas include: developments in the Middle East geopolitical situation, the pace of sustained demand recovery, the implementation of the third round of coking-coal price hikes, steel exports, macroeconomic policy, the issuance of special-purpose bonds, energy prices, and President Trump’s visit to China. Potential risks to watch include: recurring Middle East geopolitical tensions, obstacles to the full implementation of coking-coal price hikes, marginal declines in steel exports, sharp volatility in energy prices, and the early emergence of off-season characteristics.

Han Weidong: The fundamental supply-and-demand dynamics in the steel industry have not undergone any major changes; from January to April, both domestic and export demand declined year on year on a cumulative basis. Nevertheless, steel prices have risen, primarily due to an improving macroeconomic environment, the rally in the Wenhua Commodity Index, and the relatively low valuation of steel. At present, the undervaluation has largely been corrected, but the volatility in the Wenhua Commodity Index is not driven by underlying global economic fundamentals and remains highly uncertain. Moreover, the core supply-demand imbalance in the steel sector lies on the supply side rather than the demand side; therefore, it is unwise to hold overly optimistic expectations for future price movements. Steel prices are likely to enter a new phase of range-bound trading with limited directional momentum, offering no clear trend-driven opportunities. The priority now is to lock in profits while preparing for the onset of the off-season. During the off-season, sales typically fall by about 10% compared with peak-season levels. If total social inventories continue to decline through year-end, overall market risk will remain manageable; however, if inventories reverse course and begin to rise, this would signal bearish pressure. Should the steel industry face material risks in the future, such risks will almost certainly stem not from internal industry factors but from systemic risks—this is precisely why we place such strong emphasis on monitoring the macroeconomic landscape.

Zhang Guangzhi, Deputy General Manager of Marketing at Youfa Group: Macroeconomic Overview: No significant changes; the U.S.–Iran conflict remains unresolved, and the Strait of Hormuz remains closed. Following the release of detailed evaluation guidelines for China’s carbon peak and carbon neutrality goals, a major cyclical upturn in the steel market is set to begin.

Industry Perspective: Steel mills are seeing robust export orders, while domestic supply remains relatively tight, making the short-term supply–demand mismatch the primary driver behind the rise in steel prices. Notably, the spot price of rebar 2610 has already climbed above the break-even cost for electric-arc furnace producers, and the hot-rolled coil spot price is also approaching export-order acceptance levels. Whether the market can sustain this upward momentum going forward will depend on the extent to which demand can pick up, macroeconomic factors, and the degree to which export prices are accepted by the market. Looking at data for the five major steel products, overall inventory remains elevated year on year; once export volumes are excluded, the supply–demand balance tilts toward oversupply. Should some of the output previously exported by domestic producers flow back into the domestic market, the resulting supply imbalance—combined with seasonally weaker month-on-month demand—could put downward pressure on the market. The recent sideways trading in futures reflects the market’s normal response to these dynamics. If overseas markets can absorb and accept current export quotations, there is still room for further gains in futures; otherwise, the hot-rolled coil futures contract will likely face pressure in the 3,500–3,520 range. Meanwhile, in North China—particularly in Handan and parts of Shandong—shortages of rebar and wire rod are quite pronounced, leading to structural and regional price differentials across product categories.

Over the long term, we are currently at the bottom of a major steel-cycle upturn. China’s dual-carbon policy will drive up steel costs, while the stabilization of the real estate market and growing steel demand from the manufacturing sector will both serve as the core drivers of this cyclical rally.

Overall, the market has remained volatile this week. While a long-term bearish outlook is unwarranted, short-term pressure persists; investors may want to watch for trading opportunities following any pullback.