Experts say city—June 1

My Steel: On the supply side, last Friday’s total output of the five major steel product categories reached 8.6372 million tonnes, up 15,200 tonnes week-on-week. This period saw a divergence in the product mix: rebar and wire rod production rebounded, while flat‑rolled steel output declined. Total inventories of the five major steel products stood at 15.4444 million tonnes, down 124,700 tonnes from the previous week, a 0.8% drop. Inventories of all five product categories fell, with building‑materials and sheet‑steel stocks moving in tandem: building‑materials inventories decreased by 112,400 tonnes, and sheet‑steel inventories by 12,300 tonnes. On the demand side, weekly consumption of the five major steel products totaled 8.7619 million tonnes, with building‑materials consumption down 2% week-on-week and sheet‑steel consumption up 0.4%. Among the five categories, the consumption patterns for building materials and sheet steel diverged. Both rebar and hot‑rolled coil are now entering the off‑season; both currently exhibit limited consumption elasticity. Hot‑rolled coil production is being well managed, and with domestic–international price differentials remaining elevated, its prices have so far held firm. In the short term, raw‑material prices are under pressure from disruptions on the coking‑coal supply side, providing strong cost support. With the current supply‑demand balance for finished steel relatively stable—and assuming pig iron capacity remains at present levels—cost‑support dynamics remain robust as long as geopolitical tensions persist. Accordingly, we expect finished‑steel prices to trade in a high‑range consolidation this week, supported by ongoing cost pressures, while closely monitoring developments in U.S.–Iran negotiations and trends in domestic–international price differentials.

Steel Home: Last week, domestic steel prices first rose and then fell, ending with a modest overall decline. Looking ahead, the following factors are supportive: First, following the coal mine accident in Shanxi, the State Council has established an accident investigation team; coupled with June being National Work Safety Month, coal supplies from major producing regions have tightened, raising expectations for a fifth round of price hikes in coking coal. Second, after steel inventories rebounded, they eased somewhat last week, easing the supply‑demand imbalance to some extent. On the downside, recent heavy rainfall in many regions has significantly dampened downstream demand; meanwhile, steel mills have maintained steady production, and with seasonal demand weakening, the underlying supply‑demand dynamics are gradually softening. Overall, the steel market remains subdued. The typical off‑season lull in demand has shifted the market from a previously balanced supply‑demand situation toward a weaker equilibrium. However, given the lingering expectation of tight coking coal supplies following the Shanxi mine accident, this constraint is unlikely to ease in the short term. Accordingly, domestic steel prices this week are likely to remain stable with a slight upward bias.

Lange: Supply Side: Influenced by the profit‑and‑loss dynamics across steel grades, steel mills have shifted from strong to weaker capacity release, leading to a modest decline in hot metal output; however, production of certain specific grades continues to rise. Demand Side: As the traditional off‑season effects gradually take hold and widespread rainfall across the country weighs on activity, market transactions are showing marked divergence. Cost Side: Iron ore prices have edged up and down, scrap steel prices remain stable but trend lower, and coking coal prices have risen slightly, with cost support strengthening after having weakened. Accordingly, according to Lange Steel’s intelligent forecasting model, amid volatile geopolitical tensions in the Middle East, rising risks of global stagflation, a continued moderate domestic economic recovery, underpinning investment in infrastructure and manufacturing, a deceleration in the pace of supply release, divergent market performance, and strengthening cost support, the domestic steel market is expected to trade weakly with volatility this week.

Tang and Song Dynasties: Supply Outlook: This week, the domestic steel market is expected to trade in a weak, choppy range, characterized by “high supply undergoing adjustments, subdued demand, a deceleration in inventory destocking, and cost support.” Hot metal output remains elevated; driven by shrinking margins, supply is making modest adjustments but is unlikely to contract sharply. With the South entering an extensive plum‑rain season and the North experiencing more frequent heatwaves, rebar demand is showing signs of weakening, while social inventories of hot‑rolled coil are mounting. Overall, fundamental drivers remain relatively weak, and with a flurry of domestic macroeconomic data releases and a pronounced hawkish tone overseas, market sentiment is cautious, putting downward pressure on prices and likely keeping them in a weak, oscillating pattern. On the futures front, key support lies around 3,120, while resistance looms near 3,180–3,200. Demand Outlook: The steel market is gradually slipping into its traditional off‑peak season. With the South bracing for plum rains and the North facing increasing heat, outdoor construction activities are directly impacted, leading to a slower pace of end‑user purchasing and continued softness in apparent demand. As the mainstay of construction steel, rebar demand is set to keep weakening. Steel consumption across manufacturing sectors is diverging: plate orders show some resilience, yet lack sustained recovery momentum, resulting in a split between building‑material and plate demand. Meanwhile, steel exports are expected to decline. Taken together, these factors point to persistently weak demand as the dominant market theme. Inventory Outlook: The pace of inventory destocking may continue to slow. Weaker demand has prompted modest reductions in mill inventories, while the rate of destocking in the broader market is steadily decelerating, with some product categories even seeing brief, small increases in stockpiles. Although overall inventory levels remain on a downward trajectory, the impetus for further reduction has noticeably weakened. This Week’s Key Focus: China’s official May manufacturing PMI, non‑manufacturing PMI, and Caixin manufacturing PMI; U.S. May ISM manufacturing and non‑manufacturing PMIs, ADP employment figures, minutes from the May Federal Reserve policy meeting, and any shifts in the Fed’s hawkish stance; the outcome of the fifth round of coking‑coal price hikes; changes in iron‑ore port inventories; and developments in U.S.–Iran negotiations and the resumption of shipping through the Strait of Hormuz. Risk Factors: Escalation of gridlock in U.S.–Iran talks; a more hawkish-than-expected Fed policy response; a sharper-than-expected slowdown in off‑peak demand; continued buildups in hot‑rolled coil inventories; and a decline in steel export orders.

Zhuochuang Information: Steel prices are expected to remain on a weakening trend this week. The main reasons are threefold: First, with the onset of the rainy season and the approaching middle‑school and college entrance exams, downstream construction activity is anticipated to decline, leading to weaker demand and putting downward pressure on spot prices. Second, raw material prices are likely to stay broadly stable or edge lower; with the exception of coking coal, which remains supported by tight supply, iron ore and steel billet prices are expected to be mostly steady to slightly softer, limiting overall cost support. Third, bearish sentiment is spreading—according to a survey by Zhuochuang Information, last week’s steel industry confidence index stood at 37.2, down 5.49 points from the previous period, signaling a marked deterioration in market confidence.

Han Weidong: As U.S.–Iran negotiations progress, market expectations regarding the Strait of Hormuz have quietly shifted, and commodity prices have continued to ease. Three months on, China has not tapped a single ton of its strategic petroleum reserves, and there is no need for excessive concern about coking coal supplies. According to the latest weekly data, steel mill output remains on the rise, leading to a gradual buildup of underlying tensions. Total steel inventories are still declining, but the current supply‑demand imbalance has yet to reach an inflection point. Apparent demand has edged lower, reflecting typical off‑season patterns. Steel prices have now returned to around last year’s average level. In the short term, the market has settled into a more subdued phase, with no standout issues; under normal operating conditions, performance should remain steady. Over the past 12 months, ten were characterized by range‑bound, lackluster trading. Since October last year—spanning nearly eight months—only one period, from mid‑April to mid‑May, saw a modest rebound; at all other times, prices remained confined to a choppy, sideways pattern.

Zhang Guangzhi, Deputy General Manager of Marketing at Youfa Group: Supply and Demand: Last week, the market experienced volatile trading. Following the fifth round of price hikes for coking coal and metallurgical coke—directly triggered by the mine accident in Qinyuan County, Shanxi—the most actively traded futures contract rose 9.94% for the week, underpinned by strong cost-side support. Meanwhile, iron ore arrivals rebounded, port inventories remained elevated, and prices trended lower amid this dynamic. However, downstream steel products failed to follow suit, squeezing mill margins. Pig iron output from 247 blast furnaces averaged 2.41 million tons per day, up slightly by 19,000 tons week-on-week, staying above 2.40 million tons for several consecutive weeks; mills remain reasonably profitable, with limited incentive to cut production. Aggregate output of the five major steel products totaled 8.6372 million tons, up 15,200 tons week-on-week; construction‑related products (rebar and wire rod) increased, while sheet and coil products (hot‑rolled and cold‑rolled) edged down. Apparent demand stood at 8.7619 million tons, down 43,900 tons week-on-week, reflecting a pronounced decline in construction demand, though plate demand showed resilient strength, as typical seasonal softness began to take effect. Total inventory reached 15.4444 million tons, declining only 124,700 tons week-on-week—a 0.8% drop, marking the smallest weekly decline since May. Social inventories rose slightly, while mill inventories fell slowly, suggesting that inventory accumulation may resume in mid-to-late June. Steel product price gains lagged behind raw material costs, further compressing mill margins: long-process mills saw rebar and hot‑rolled steel gross margins fall by 10 and 9 yuan per ton, respectively, while electric‑arc furnace steel margins slipped by 8 yuan per ton. Looking ahead, two key factors will shape the market: first, sustained high export levels; or second, domestic stimulus measures—either one must materialize. Another critical issue is the interplay between steel‑cost dynamics: with U.S.–Iran negotiations concluded and the Strait of Hormuz reopened, seaborne iron‑ore freight rates have fallen, potentially pushing the 2609 contract down to a support range of 730–750 yuan per ton, thereby reducing steel costs by 50–60 yuan. Conversely, coal‑mine accidents have shifted the center of gravity for coking coal upward by more than 100 yuan, adding 50–60 yuan to steel costs. These opposing forces have largely offset each other, indicating… Hormuz Once the Strait is opened, steel costs are unlikely to see significant changes; if it remains closed, costs will likely rise. This also suggests that it will be quite difficult for rebar prices to fall below 3,100. In summary, in spot‑market trading, we are wary of both the risk of a prolonged conflict and the possibility of missing out if the war ends or domestic policies are introduced ahead of schedule. At the same time, with steel mills’ inventories at very low levels—some have already booked orders through July—it’s unlikely they’ll offer further price cuts. Therefore, cautious participation is essential now; on the futures front, proceed with caution or refrain from shorting altogether.