Experts say city—July 7

My Steel: On the supply side, last week’s total output of the five major steel products reached 864.16 million tons, up 52,500 tons week-on-week, a 0.6% increase. With the exception of cold‑rolled sheet and wire rod, production of the other three major steel products all rose compared with the previous week, driven primarily by the resumption of operations at several blast furnaces and production lines. In terms of inventories, total stocks of the five major steel products stood at 16.2305 million tons, up 220,600 tons week-on-week, a 1.38% rise. Among them, factory inventories declined slightly on a weekly basis, with the drop largely attributable to rebar; by contrast, social inventories increased, with rebar accounting for the bulk of the rise. On the demand side, weekly consumption of the five major steel products totaled 8.4210 million tons, up 3.3% from the prior week. Specifically, construction‑related steel consumption rose 8.2% week-on-week, while flat‑product consumption edged up 0.9%. Apparent consumption across the five major product categories thus showed simultaneous growth in both construction‑related and flat‑product segments. Regarding supply, production of the five major steel products remained broadly stable last week. However, as electric‑arc furnace margins have turned negative while blast‑furnace profits are also under pressure, with blast‑furnace margins currently around –RMB 38 per ton as of July 1, output is expected to decline going forward. On the demand front, order intake has slowed during the off‑season, leading to continued buildups in factory inventories and underscoring pronounced seasonal characteristics. As for raw materials, the ninth round of price hikes for coking coal has now been implemented, while market participants remain locked in negotiations over a potential tenth round; spot prices remain generally firm, providing support to finished‑steel prices. Overall, macro sentiment remains relatively stable, but demand exhibits clear off‑season traits, and underlying imbalances in the steel market are mounting. Consequently, short‑term price movements are likely to be volatile and tilted to the downside.

Steel Home: Last week, domestic steel prices mostly edged lower, with overall trading remaining subdued and steel inventories continuing to rise. Current favorable factors include: first, the ninth round of coking coal price hikes has taken effect, with some coking producers planning a tenth increase, while iron ore prices are showing signs of stabilizing and rebounding, bolstering production cost support; second, steel mills are broadly operating at a loss, and several companies have scheduled maintenance in the near term, leading to a contraction in supply. Unfavorable factors comprise: first, weak downstream demand, as heavy rainfall and extreme heat have dampened construction activity, underscoring the pronounced seasonal lull; second, sluggish market turnover, with steel inventories rising for three consecutive weeks, intensifying supply-side pressure; and third, lackluster performance in black‑metal futures, which is exerting some downward pressure on spot prices. Overall, domestic steel prices are expected to remain largely lower this week.

Lange: Amid a sluggish global economic recovery, recurring geopolitical tensions, and a moderate domestic macroeconomic rebound—coupled with a slight uptick in the manufacturing PMI, a shift from strong to weaker supply releases, mixed market activity, and resilient cost support—the domestic steel market is expected to experience weak, choppy trading this week.

Tang and Song Dynasties: This week, the domestic steel market is expected to remain volatile and slightly weaker, trading near a bottom. The market landscape is characterized by weak off-season demand, a lack of supportive macroeconomic factors, and diminishing cost‑driven support. Expectations of production cuts at steel mills are rising, but downstream demand is weakening in tandem, suggesting that inventories may continue to build modestly. With no clear directional catalysts in sight, we recommend a cautious wait-and-see approach, closely monitoring the implementation of maintenance shutdowns scheduled for mid-July and developments in macro policy. In the short term, rebar futures should watch support around 3,055; a break below this level could open the door to the 3,000 mark. Supply outlook: Steel mill margins remain under pressure, with losses deepening further. July maintenance schedules have increased noticeably, though most shutdowns are concentrated after mid-month, leaving limited capacity reductions in the first half of the month. While overall supply is expected to decline, uncertainties persist regarding the durability of production curtailments and their actual enforcement. Demand outlook: Southern China continues to endure scorching heat, with localized heavy rainfall; northern regions face frequent rains, further constraining construction activity in infrastructure and real estate. The steel market remains firmly in the traditional off-season, with seasonal weakness in end‑user demand yet to abate. Inventory outlook: With supply easing slightly and demand staying subdued, inventories are likely to keep accumulating. This week’s key focus areas include the release of June and first-half macroeconomic data—such as GDP, investment, and real estate—and developments in production restrictions and maintenance activities in Tangshan. On the industry front, attention will be paid to the pace of declines in hot metal output, whether this exerts downward pressure on raw material prices, and changes in finished‑steel inventories. Risk considerations: Be alert to potential headwinds from weaker-than-expected GDP or real estate data, insufficient production cuts by steelmakers, rapid inventory buildups, adverse feedback loops in input markets, dovish or hawkish shifts in Federal Reserve policy, and escalating trade tensions.

Zhuochuang Information: Steel prices are expected to fluctuate and trend lower this week. The analysis points to the following factors: First, with the onset of July and a rise in high‑temperature weather, demand is likely to remain subdued while supply faces downward pressure, putting a cap on prices. Second, despite the tenth round of price hikes for coking coal, which has kept raw material costs relatively firm, supply‑demand imbalances persist in both billet and strip steel markets; next week’s price action may weaken as cost support diminishes. Third, market sentiment has weakened compared with last week: according to a survey by Zhuochuang Information, this week’s steel confidence index stands at 33.82, down 2.10 percentage points from the previous reading, signaling another decline in market optimism—driven primarily by expectations of weaker off‑season demand, with bearish views prevailing and trading activity likely to soften.

Han Weidong: With the Strait of Hormuz now reopened, international oil prices—and the Wenhua Commodity Index they drive—have fallen back to pre‑rise levels, while steel prices have retreated to winter‑storage levels. Overall, the market has essentially returned to where it started. From a steel‑price perspective, current levels have entered a low‑price range, leaving many steelmakers in the red. Going forward, production cuts and maintenance shutdowns are likely to increase. With thin margins, weak demand, and persistently high coking‑coal prices, this is an opportune moment for output reductions. For distributors, there’s no need to panic: even if prices dip further, they should rebound later, and new inventory won’t translate into lasting losses. However, judging by the current supply‑demand imbalance—production remains at exceptionally high levels, demand is sluggish, and inventories exceed last year’s—the market is unlikely to perform well. Don’t rush into speculative bets; overall, prices are expected to remain volatile. At present, we’re less than RMB 100 away from the extreme lows seen in 2024 and 2025. Should such lows materialize, they would represent opportunities rather than risks. Meanwhile, oil prices have already fallen below the U.S. strategic‑reserve price of the past three years and are approaching China’s full‑cycle oil‑reserve threshold. U.S. crude inventories have dropped to their lowest level since the 1980s, and India is also beginning to plan its own oil reserves. As a result, the negative impact of oil prices on the Wenhua Commodity Index is nearing its end. On July 30, 2024, the CPC Central Politburo meeting first called for measures to curb “internal involution” in the steel industry; by the end of this month, that initiative will mark its second anniversary. We look forward to the next meeting! Time is running out to address internal competition within the steel sector, and the worst phase may soon be behind us.

Zhang Guangzhi, Deputy General Manager of Marketing at Youfa Group: 1. Macroeconomic Outlook: The market remains in a semi‑vacuum phase. Domestically, investors are awaiting the mid-year economic policy meeting at the end of July. Externally, conditions have improved markedly: the Strait of Hormuz is open, oil prices have fallen, and the likelihood of U.S. interest-rate hikes has diminished.

2. Fundamentals: This week’s inventory data show both output and hot‑metal production rising, signaling a lackluster outlook. Notably, hot‑metal output has increased rather than declined. In fact, many market participants assume that steel mills will cut or halt production when margins are squeezed, losses mount, or sales stall—but this isn’t necessarily the case. Production cuts or shutdowns are often driven by non‑economic factors, such as maintaining market share, ensuring workforce stability, and preserving industry standing. That said, with losses steadily widening, most mills are likely to make rational decisions. Consequently, hot‑metal output could well fall below 240 million tons.

3. However, this week, domestic and international factors such as the heatwave and the World Cup will continue to play a dominant role, keeping market activity subdued. That said, the lackluster domestic economic data has naturally fueled expectations for policy measures at the upcoming July meeting. Coupled with declining blast‑furnace utilization rates at steel mills, it would be unwise to adopt an overly pessimistic stance this week. If iron ore prices avoid a further breakdown, steelmakers step up production cuts, demand shows even modest improvement, or stimulus measures generate positive market sentiment, stabilization could materialize as early as this week.