Experts say city—June 29

My Steel: On the supply side, last week’s output of the five major steel product categories totaled 8.5891 million tonnes, down 91,100 tonnes from the previous week. The mix of steel grades remained unchanged this period, with production declining across all five segments, led by a drop in rebar output. Total inventories of the five major steel products stood at 16.0099 million tonnes, up 439,700 tonnes week-on-week, a 2.8% increase. Inventories of both construction‑grade and sheet‑grade steels rose in tandem: construction‑grade stocks increased by 315,600 tonnes, while sheet‑grade stocks climbed by 124,100 tonnes. On the demand side, weekly consumption of the five major steel products reached 8.1494 million tonnes, with construction‑grade consumption falling 12.7% and sheet‑grade consumption down 3.1% compared with the prior week. Among the five segments, construction‑grade and sheet‑grade consumption patterns were broadly aligned. Currently, both rebar and hot‑rolled coil are entering the off‑season; dampened demand due to the plum‑rain season and limited improvement in downstream project financing weighed on the market, leading to a sharp decline in apparent rebar consumption last week. Going forward, with supply expected to rise and demand to weaken, inventory builds are likely to persist, further weakening the underlying fundamentals. For hot‑rolled coil, near‑term supply pressures are expected to remain relatively contained. With the eighth round of coking‑coal price hikes now in effect, current production margins have contracted to around RMB 50 per tonne. Coupled with the possibility of renewed environmental‑regulation enforcement in parts of northern China—prompting some mills to schedule maintenance—it appears that supply pressures on hot‑rolled coil may stabilize. In the short term, we anticipate continued accumulation of supply‑demand imbalances in finished‑steel markets, with prices likely to trade in a narrow range at low levels.

Steel Home: Last week, domestic steel prices continued to decline, with weakening demand during the off-season being the primary driver. Looking at recent market conditions: on the downside, seasonal weakness is pronounced, and widespread heavy rainfall in many regions has dampened outdoor construction activity, further weighing on downstream demand. Meanwhile, steel mills have maintained high production levels; key steelmakers reported a month-on-month rebound in crude steel output in the first half of the month, with blast furnace and electric arc furnace utilization rates remaining elevated. Steel inventories have risen for two consecutive weeks, with the pace of increase accelerating. In addition, the combination of weak demand and persistently soft futures prices has prompted cautious trading by market participants, leading to lower overall steel sales volumes and subdued market activity. On the upside, since the May 22 coal mine accident, coking coal prices have already risen five times, squeezing steelmakers’ profit margins and bolstering their willingness to resist price cuts. Moreover, following the adjustment since mid-May, spot prices have fallen to relatively low levels, leaving limited room for further declines. With cost support underpinning downward moves and demand constraints capping upward pressure, domestic steel prices are expected to edge lower again this week. Key near-term factors to watch include: first, steel mill production—any meaningful reversal will hinge on a reduction in supply; and second, the implications of upcoming central-level meetings, as economic headwinds remain significant in the second quarter, raising the possibility of high‑level gatherings such as Politburo or Central Financial and Economic Affairs Commission meetings.

Lange: Supply Side: Influenced by profit‑and‑loss dynamics across steel grades, steel mills have shifted from a subdued to a more vigorous ramp-up in capacity, leading to a modest increase in hot metal output, while production of individual grades has shown mixed trends. Demand Side: As the traditional off‑season effects continue to take hold and hot, rainy weather persists nationwide, market transactions have correspondingly weakened. Cost Side: With iron ore prices edging lower, scrap steel prices remaining stable but trending downward, and coking coal prices registering a slight uptick, production costs have maintained resilient support. Accordingly, Lange Steel Intelligence forecasts that, amid mounting pressure on global risk assets, recurring geopolitical tensions, a moderate domestic economic recovery, steady fiscal revenue rebound, continued policy measures bolstering domestic demand, a shift from weak to stronger supply release, a renewed decline in market turnover, and sustained cost‑driven resilience, China’s steel market is likely to experience a mild downward trend this week.

Tang and Song Dynasties: This week, the domestic steel market is expected to remain volatile and generally weaker, with a market dynamic characterized by expectations of supply contraction, deepening seasonal demand weakness, rising inventories, and cost support at the bottom. Sustained margin pressure on steel mills is fueling growing expectations of production cuts, while the plum‑rain season is weighing on end‑user demand, potentially pushing inventories higher. On the overseas front, a flurry of Fed officials’ remarks and upcoming nonfarm payrolls data will shape rate‑hike expectations; stronger‑than‑expected employment gains could cap commodity prices. Meanwhile, U.S. steel import tariffs were raised to 50% effective July 1, adding geopolitical risks and introducing external headwinds. With overall supply and demand remaining weak and cost support insufficient to lift steel prices, the market is likely to stay in a volatile, subdued range. Key support for rebar futures lies around 3,060, while resistance hovers near 3,130. Supply outlook: As steel prices continue to fall and coking coal has seen nine consecutive price hikes, steel mill margins remain under severe pressure. Coupled with the peak summer maintenance season, long‑process steelmakers are likely to ramp up proactive production cuts and maintenance activities. At the same time, independent electric‑arc furnace (EAF) producers, facing tight power supplies during the summer peak and persistent losses, may see further declines in output, reinforcing expectations of supply tightening. Demand outlook: Widespread high temperatures and frequent rainfall across China are sharply reducing outdoor construction efficiency. With downstream project financing unlikely to improve significantly, steel demand is entering the traditional off‑season, leading to continued softness in apparent consumption of construction and sheet‑metal products and sustained weak terminal demand. Inventory outlook: Despite marginal supply contraction, the deepening impact of the seasonal lull and insufficient demand release will keep inventories piling up, extending the build‑up phase as the market enters its typical seasonal accumulation period. This week’s key focus: the official June manufacturing PMI (June 30), the RatingDog manufacturing PMI for June; U.S. June nonfarm payrolls and unemployment rate (July 3); the adjustment of U.S. steel import tariffs (raised from 25% to 50% effective July 1) and the update to the tariff exemption list. Industry‑specific highlights: the implementation of recent coking coal price hikes, changes in finished‑steel inventories, and July blast‑furnace maintenance schedules at steel mills. Risks to watch: ample coking coal supply putting downward pressure on prices; limited room for further coking coal price increases; accelerating inventory build‑up in finished steel prompting production cuts; strong U.S. nonfarm data boosting rate‑hike expectations and suppressing commodities; and the doubling of U.S. steel import tariffs, which could weigh on exports.

Zhuochuang Information: Steel prices are expected to remain weak this week. The analysis points to the following factors: First, high temperatures and frequent rainfall have constrained outdoor construction activities, while the traditional off-season continues to deepen, keeping end‑user demand persistently subdued and weighing on prices. Second, raw material billets have been trading in a range with downward pressure, weakening cost‑based support for prices. However, coking coal remains on a firm trend, and the ninth round of price hikes is highly likely to take effect this week, providing continued floor‑level support. Third, market sentiment has improved compared with last week; according to a survey by Zhuochuang Information, this week’s steel confidence index stands at 35.92, up 2.27 percentage points from the previous reading. Despite this rebound in confidence, overall outlook remains cautious, and proactive sales will continue to dominate.
 

Han Weidong: Over the past two years, three pivotal events have reshaped the world: first, the global free-trade system has been dismantled, with no new framework yet in place; second, the global oil‑market order has been upended, and a replacement system remains elusive; and third, since the appointment of the new Federal Reserve Chair, Jerome Powell, efforts have been underway to dismantle the old Fed‑centric structure and forge a new one. The nation’s assessment of this once-in-a-century transformation has proven remarkably prescient. With the signing of the U.S.–Iran memorandum, global commodity prices have reverted to pre‑war levels. The recent steel price increases were, at their core, driven by inflationary expectations; prices have now settled near their average levels. Iron ore prices have also shed their overvalued bubble, while coking coal and coke prices have found a new equilibrium in the current supply‑demand environment. Steel prices have been trading in a choppy range for the past year and a half, and this balance is proving hard to disrupt. We’ve already identified the steel industry’s price floor—after more than two years of weathering countless negative factors, even minor setbacks are unlikely to push prices lower. Meanwhile, breaking the upper bound is even more challenging: broader global conditions, persistent industry-wide overcapacity, and, above all, the pervasive culture of internal competition all weigh on any upward move. This period of volatility has been prolonged, and the market’s greatest opportunity lies in the fact that “others” haven’t yet adjusted—giving us a head start. Don’t get bogged down in short‑term price swings; focus instead on effective operational execution. The current price decline isn’t cause for undue concern: while prices near the average aren’t the bottom, they will eventually rebound. The real risk isn’t a sustained downtrend—it’s a one‑way plunge with no chance of reversal. Over the long term, keep your eye on current buying‑selling margins and profitability, and leave inventory‑related gains or losses to time.

Zhang Guangzhi, Deputy General Manager of Marketing at Youfa Group: Macroeconomic Outlook: Domestically, conditions remain calm, with investors patiently awaiting policy shifts ahead of the July Politburo meeting. On the external front, the spotlight remains on U.S.–Iran tensions, driven largely by Israeli factors. Overall, the situation in the Strait of Hormuz continues to evolve in a positive direction, and oil prices have already priced in an optimistic outlook. That said, U.S. inflation and interest-rate hikes remain key concerns and significant variables. With oil prices trending lower, U.S. inflation is likely to ease, which should temper expectations of further rate hikes. However, the market has already begun pricing in such moves, so whether the Fed will actually raise rates remains uncertain—though any rate hike would undoubtedly weigh on the global economy.

From the supply-and-demand perspective: Compared with last year, pig iron and hot-rolled steel output have declined, while rebar production has remained flat. However, inventories of both rebar and hot-rolled steel are significantly higher than last year, indicating a pronounced oversupply. Meanwhile, steel mill inventories are rising rapidly, and mounting inventory pressure is beginning to surface. Market attention should be focused on how much pig iron output will be cut in response. In addition, the ninth round of coking‑coal price hikes remains under negotiation, with a high likelihood of implementation; cost support persists, making it difficult for prices to fall further. Whether weak demand during the off-season will trigger a negative feedback loop remains a key risk to consider. Over the next two to three weeks, subdued demand is likely to persist, and with the World Cup concluding on the 20th, steel prices may finally bottom out.