Experts say city—July 20

My Steel: On the supply side, last week’s output of the five major steel product categories totaled 8.2582 million tonnes, down 212,100 tonnes from the previous week, a decline of 2.5%. With steel margins under sustained pressure recently, production in these five segments has continued to fall, easing supply-side constraints marginally. Total inventories of the five major steel products stood at 16.1606 million tonnes, a weekly drop of 178,600 tonnes, or 1.1%. The recent turn to lower overall inventories was largely driven by the rapid contraction in supply. Moreover, inventory dynamics show a structurally synchronized decline: both mill‑level and social‑sector stocks have fallen, with the latter declining more sharply. On the demand side, last week’s apparent consumption of the five major steel product categories reached 8.4368 million tonnes, up 0.9% from the prior week. Specifically, construction‑steel consumption rose 3.6%, while flat‑steel consumption fell 0.4%. With the impact of typhoons waning and reconstruction needs emerging in some southern regions hit by flooding, demand for construction steel has staged a modest rebound. Overall, last week saw supply contracting and demand expanding across the five major steel product lines, leading to a temporary decline in total inventories and a broadly neutral‑to‑stronger market backdrop. Regarding supply, current profit margins at steel mills remain weak, with cash flow at some plants eroded, suggesting that short‑term production cuts are likely to persist and further declines in output remain possible. On the demand front, the off‑season has set in, and recurring heatwaves and rainfall continue to weigh on activity. Even if post‑disaster reconstruction boosts demand in certain areas, the broader seasonal slowdown is expected to cap any sustained improvement in construction‑steel demand. Meanwhile, manufacturing and export‑related demand are also subdued during this period, leaving flat‑steel demand similarly lackluster. In sum, with both supply and demand remaining weak, it is unlikely that inventories will see a sustained drawdown during the off‑season. A relatively mild pace of inventory build‑up could, however, provide supportive headwinds for steel prices. That said, given the ongoing near‑term production cuts at mills, cost‑support dynamics may begin to loosen, making it difficult for steel prices to sustain a one‑sided upward trend in the near term. Profit margins in the steel sector, meanwhile, may gradually bottom out as production cuts continue.

Steel Home: Last week, domestic steel prices followed a pattern of initial weakness followed by modest gains, with overall market fluctuations remaining mild; among them, hot-rolled coil performed slightly stronger than other product grades. Looking at recent market conditions, seasonal factors such as high temperatures and frequent rainfall continue to weigh on downstream demand. Downstream buyers remain reluctant to build up inventories, while traders adopt a cautious stance, resulting in subdued trading activity. Nevertheless, favorable factors are gradually accumulating: first, mainstream steel producers are now operating at full loss, prompting increased production cuts and output restrictions; steel inventories, after a period of rapid buildup, have stabilized, helping to rebalance supply and demand. Second, iron ore prices have bottomed out, and supplies of coking coal and coke remain tight, providing robust cost‑support at the lower end. Third, economic growth in the second quarter faces certain pressures—investment is declining, and consumer spending remains sluggish—raising the prospect of targeted measures to stabilize growth in the coming months. This week, the domestic steel market is expected to trade in a volatile but generally firmer range. Key areas of focus will be steel mills’ production levels, inventory dynamics, and the impact of seasonal factors on market trends.

Lange: Amid diverging global recovery prospects, escalating geopolitical tensions in the Middle East, a K-shaped economic divergence domestically, growing expectations for counter-cyclical and cross‑cycle policy adjustments, a shift from strong to weakening supply releases, a reversal of market turnover from rising to falling, and strengthening cost‑support pressures, China’s steel market is expected to remain volatile and uneven this week.

Tang and Song Dynasties: This week, the domestic steel market is expected to trend upward with limited downside. Stronger futures prices are directly boosting spot‑market sentiment, while three tailwinds—expectations of a Fed pause in rate hikes, hopes for pro‑growth policies at the month‑end Politburo meeting, and rising energy prices—are providing additional support. However, weak end‑user demand and lingering high inventory pressures cap upside potential. Going forward, key factors to watch include the implementation力度 of production cuts in Tangshan, the pace of end‑user project starts, and the rate of inventory destocking. On the futures front, support lies near 3,095, with resistance around 3,150. Supply outlook: Production curtailments in Tangshan have entered the enforcement phase, and with steel mills under pressure from losses, the scope of maintenance‑driven output reductions is likely to expand. Electric‑arc furnace operators face constrained profits on off‑peak electricity, keeping utilization rates low and limiting any meaningful supply additions; steel output is expected to decline slightly this week. Demand outlook: With Tangshan’s production cuts now in effect and steelmakers grappling with losses, the range of maintenance‑related output cuts could widen. Meanwhile, electric‑arc furnace plants continue to operate at low capacity due to thin margins on off‑peak power, further constraining supply growth; steel output is forecast to edge lower this week. Inventory expectations: Total steel inventories remain elevated for this time of year, with slow destocking in the broader market. Weak end‑user demand and only modest declines in production suggest that overall steel stocks will likely fall only gradually this week. This week’s focus: On the industry side, closely monitor the implementation of Tangshan’s production cuts, the pace of end‑user project starts, hot metal output, shifts in demand, and changes in finished‑steel inventories. Risks to watch: Escalation of U.S.–Iran tensions, continued inventory build‑ups during the off‑season, and weaker‑than‑expected production cuts in Tangshan; as well as policy measures aimed at stabilizing growth falling short of expectations, leading to unmet market forecasts.

Zhuochuang Information: Steel prices are expected to trade in a narrow range this week. The outlook can be attributed to two key factors: on the one hand, increased maintenance shutdowns for certain grades, such as hot-rolled coil, have eased supply pressures; meanwhile, market expectations for the Politburo meeting at the end of July remain relatively strong, bolstering traders’ willingness to hold firm on prices and providing some support. On the other hand, amid the off-season, weak terminal demand persists, with sluggish demand exerting downward pressure on prices. Amid this tug-of-war between bullish and bearish forces, steel prices are likely to remain volatile, oscillating within a limited trading range. Additionally, market sentiment has continued to improve compared with last week: according to a survey by Mysteel, this week’s steel confidence index stood at 50.34, up 6.67 percentage points from the previous reading, and the resulting improvement in market mood is also offering some support.

Han Weidong: Last week, inventories finally turned lower, returning to their normal trajectory. According to “Steel Xiaoxianren’s” tally of daily crude steel output, production has already fallen by 100,000 tons from its peak. Yesterday, I spoke with Wang Jianhua of Shanghai Steel Union, who noted that many steelmakers plan to cut output in the second half of the year. On the demand side, both “Steel Xiaoxianren’s” data and Shanghai Steel Union’s figures for the five major steel products show a 1–2% decline this year. Looking at leading indicators such as fixed‑asset investment, downstream demand is expected to keep weakening. Prices remain in a low range, yet output stays elevated, leaving the market without upward momentum. For now, it’s best to exercise patience and wait for conditions to normalize.

Zhang Guangzhi, Deputy General Manager of Marketing at Youfa Group: 1. With U.S.-Iran tensions escalating and the Strait of Hormuz situation heating up—Trump has announced a blockade of the strait, while Iran has vowed to close it—a war that was widely considered economically and militarily untenable is instead intensifying. Oil prices are once again being driven sharply higher, while domestically weak commodity markets appear, for now, to be temporarily overlooked by capital flows. With the U.S.-Iran conflict unlikely to abate, the Strait of Hormuz remaining blocked, U.S. inflation proving stubbornly high, the Federal Reserve’s rate hikes failing to deliver relief, and the global economy struggling to improve, these developments form a cascading sequence of adverse effects that will weigh heavily on market performance in the second half of the year. 2. In the second quarter, China’s GDP grew 4.3%, a sharper-than-expected slowdown. High‑tech sectors are gaining share in the economy and leading growth, while official statistics show exports far outpacing domestic demand. Traditional industries remain temporarily sidelined; however, the relatively weak Q2 GDP data could, if it prompts more aggressive policy measures at the end-of-month Politburo meeting, yield outcomes that exceed expectations—this would be a positive development. That said, investors should avoid excessive optimism about the traditional, cyclical sectors. Consequently, in the second half of the year, beyond the usual seasonal rebound in demand, one should not anticipate overly strong gains. 3. Domestically, steel producers have significantly cut output, with declines in rebar and hot‑rolled coil production. Pig iron output has settled around 239 million tons, and inventories of the five major steel products are falling, suggesting that supply and demand have already balanced even in the off‑season. The impact of production cuts persists, underpinned by cost support, while market sentiment remains constrained by the off‑season. Prices are likely to trade in a narrow range this week. Looking ahead, demand in the second half is expected to remain cautious as investors await proactive policies from the Central Politburo, though room for significant upside is limited. At the same time, a normal recovery in peak‑season demand remains worth anticipating.