Experts say city—May 25

My Steel: On the supply side, last week’s total output of the five major steel products reached 8.622 million tonnes, up 219,600 tonnes from the previous week, a 2.6% increase. With steel margins remaining relatively strong and billet exports facing headwinds, production pressure on finished steel rose noticeably, particularly for construction‑grade steel. Meanwhile, total inventories of the five major steel products stood at 15.5691 million tonnes, down 183,800 tonnes week over week, a 1.2% decline. Although overall inventories continued to fall, the pace of destocking slowed markedly compared with the prior week. In addition, inventory dynamics showed structural divergence: mill inventories increased, while the decline in social‑sector stocks narrowed significantly. On the demand side, apparent weekly consumption of the five major steel products totaled 8.8058 million tonnes, down 3.4% from the previous week—with construction‑grade steel down 3.8% and sheet‑metal consumption falling 3.1%. The rainy season’s impact across many southern regions, coupled with the recent sustained drop in steel prices, weighed on downstream demand, leading to declines in both long‑product and flat‑product consumption. Overall, last week saw rising supply and weakening demand for the five major steel products, with the pace of inventory drawdowns moderating. Fundamentally, conditions remain neutral to slightly weak. Regarding supply, steel mills are currently enjoying reasonable profit margins; although some regions face temporary environmental‑driven production curtailments, significant short‑term reductions in output are unlikely. On the demand front, with the off‑season approaching—May typically marks a gradual slowdown—there is limited room for a substantial near‑term rebound, and a downward trend may gradually take hold. In sum, steel fundamentals remain in a destocking phase, but as the rate of inventory reduction narrows, underlying pressure is likely to ease marginally. Meanwhile, cost‑support factors persist, suggesting that prices will remain relatively weak in the short term, with limited downside risk.

Steel Home: Last week, domestic steel prices mostly edged lower, with rebar and hot-rolled coil prices falling across the board—some markets saw sharper declines—largely driven by developments in the futures market. Other steel grades generally recorded modest drops. Overall, the market is characterized by weak supply and demand and declining costs. First, resource availability continues to shrink: crude steel and finished steel output both fell year-on-year in April, while rebar, wire rod, and hot-rolled coil production also declined on a year-over-year basis. Since May, blast furnace and electric arc furnace utilization rates have been trending slightly downward, and output at key steelmakers has continued to decline in the first half of the month. Second, downstream demand remains subdued. In particular, heavy rains in southern China have led to two consecutive weeks of falling steel sales volumes, with steel inventories shifting from decline to increase. Third, traders’ willingness to stock up remains limited. Inventory trends show a drop in market stocks but a rise in mill inventories; while sellers are eager to offload, their appetite for new purchases is weak, pushing inventory pressure toward the mill side. Fourth, steel costs have eased. The fourth round of coking coal price hikes failed to materialize, and although import‑mineral freight costs have risen, import volumes continue to grow briskly. Coupled with a decline in pig iron output, the outlook points to significant volatility and adjustments ahead. Overall, domestic steel prices are expected to remain largely subdued this week, with further minor declines likely.

Lange: Supply Side: Influenced by profit‑and‑loss dynamics across steel grades, steel mills have continued to ramp up capacity releases, leading to a modest increase in hot metal output, while production trends across individual grades have been mixed. Demand Side: As the traditional off‑season effect gradually takes hold and widespread rainy weather weighs on activity, market transactions have kept declining. Cost Side: With iron ore prices edging lower, scrap steel prices firming slightly but trending downward, and coking coal prices remaining stable, cost support has shifted from resilient to weaker. Accordingly, Lange Steel Intelligence forecasts that, amid rising global inflation and expectations of interest rate hikes, volatile energy prices, a domestic economy characterized by steady progress amid overall weakness in macroeconomic data, clear policy‑driven bottom‑line signals, stronger supply releases, continued declines in market turnover, and weakening cost support, China’s steel market is likely to experience fluctuating downside pressure this week.

Tang and Song Dynasties: This week, the domestic steel market is expected to trade in a volatile, slightly weaker range, characterized by ample supply, divergent demand, a decelerating pace of inventory destocking, and shrinking profit margins. Hot metal output has likely reached a temporary peak; absent any crude‑steel production‑control policies, supply pressures will gradually come to the fore. Meanwhile, southern China has entered a phase of widespread heavy rainfall, leading to a noticeable decline in rebar demand. Overall, fundamental drivers remain weak, and rising risk‑aversion sentiment is weighing on prices, suggesting that the market will continue to hover at subdued levels. On the technical front, key support for rebar futures lies around 3,120–3,160, while resistance is seen near 3,220. Supply outlook: Long‑process blast furnace utilization remains elevated and stable, with output of key products such as coil and strip largely steady. Independent electric‑arc furnace capacity utilization and rebar production are gradually stabilizing. Overall, supply remains ample; hot metal output has peaked for now, and without explicit crude‑steel curtailment measures, supply-side pressures are set to intensify. Demand outlook: Southern China has entered a period of widespread heavy rain, while northern regions are experiencing significantly more precipitation, directly impacting outdoor construction activities. As the primary steel grade used in building projects, rebar demand is entering its traditional seasonal lull, with declining volumes becoming increasingly evident and overall demand trending lower. By contrast, demand for sheet and strip steel in the processing sector remains robust, creating a structural divergence from construction‑related steel. Direct steel exports may also see some contraction. Inventory expectations: The pace of inventory drawdowns is slowing, with destocking markedly decelerating. Disparities in the magnitude of inventory reductions across major product categories reflect diverging supply‑demand dynamics. At present, no significant imbalances exist between supply and demand, and absolute inventory levels have not yet accumulated to alarming heights. This week’s key watch points include: whether the U.S. and Iran reach an agreement; the outcome of the fourth round of coking‑coal price hikes; steel export order intake; U.S. May PCE data; changes in apparent demand and the speed of inventory destocking; whether the off‑season effect is accelerating; central bank liquidity operations; Fed policy expectations; and any developments regarding crude‑steel production‑control measures. Also worth monitoring are the official May manufacturing PMI and April profits of large‑scale industrial enterprises. Risks to watch: potential roadblocks to a U.S.–Iran deal; setbacks in implementing the fourth round of coking‑coal price increases; marginal declines in steel exports; mounting expectations of global stagflation; and an accelerated off‑season effect.

Han Weidong: Following the May holiday, the Wenhua Commodity Index began to weaken, signaling the end of the rally driven by inflation expectations. The Federal Reserve has shifted from cutting rates this year to holding steady—or even hiking—rates, while some macroeconomic data fell short of forecasts, further cooling market sentiment. At the start of the year, black‑steel commodities staged a rebound fueled by low valuations, broader commodity momentum, and cost pressures; this move was not underpinned by solid fundamentals. Overall, the fundamental outlook has neither improved markedly nor deteriorated further, remaining broadly neutral. Market participants have now turned their attention to fundamentals: in May, demand declined by more than 10% month‑over‑month compared with the peak season of March and April, with no unexpected surprises. Meanwhile, pig iron output hit another record high this week, apparent steel demand weakened, the pace of inventory destocking slowed, and steel prices edged lower. For now, no catalysts have emerged to halt the downward trend.

Zhang Guangzhi, Deputy General Manager of Marketing at Youfa Group: 1. A framework agreement between the U.S. and Iran is highly likely, owing to several factors: first, Europe faces immense economic pressure, with the ongoing war driving imported inflation and significantly increasing the risk of an economic downturn. 2. The U.S. itself is under mounting debt‑related pressure. 3. There are also demands stemming from the upcoming U.S. midterm elections. 4. In the short term, a safety inspection campaign in Shanxi’s coal mines—triggered by recent incidents involving hazardous materials—could push coking coal and coke futures higher. However, as the market inevitably enters the peak‑heat, plum‑rain season and the off‑peak period, prices will quickly revert to fundamentals. Traders should avoid chasing rallies; if price spikes occur, consider selling at higher levels and adopt a contrarian approach to supply management.