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Market weakness is hard to return
The domestic steel market continued to experience a downward trend last week, with prices falling further and the decline accelerating. While some regions in northern China saw slight improvements in trading volumes, most building materials remained under pressure. In the majority of the country, steel prices fell across the board, with both forward and spot markets hitting new lows since 2013. There are no signs of a temporary recovery, and the market remains pessimistic.
In Shanghai, construction steel prices dropped by RMB 100 per ton within the week, with mainstream prices for three-grade rebar in Xicheng and Rizhao reaching RMB 3,330–3,350 per ton. Hot-rolled coil prices fell by RMB 90 per ton, with popular brands like Rizhao and Shagang quoting at 3,450–3,480 yuan per ton. Cold-rolled coil prices also declined by RMB 80 per ton, with Wuhan Iron and Steel and Benxi quoting around 4,480–4,500 yuan per ton.
Several key factors are driving the continued price drop. First, demand for steel products has weakened significantly. The real estate, automotive, and construction machinery sectors have all seen sluggish activity, which is a major contributor to the price decline. Recent economic data indicates that the domestic economy is unlikely to recover quickly, directly affecting steel demand. According to HSBC’s May manufacturing PMI, the index fell to 49.6, below the 50 threshold for the first time in seven months, signaling weak demand both domestically and internationally. As summer approaches, the southern rainy season will further limit steel demand, increasing the risk of a contraction. To compete for limited orders, traders continue to lower prices aggressively.
Second, raw material prices have fallen sharply. As of the 24th, the ex-factory price of 66% iron ore in Tangshan dropped to 800–830 yuan per ton, down 20 yuan from the previous week. In Qingdao, 63.5% iron ore was priced at 915–925 yuan per wet ton, down 15 yuan. Similarly, 63% Brazilian ore at Beilun port fell to 915–925 yuan per ton, down 20 yuan. Steel mills are reducing inventory, and transaction volumes remain weak. At the same time, the ex-factory price of carbon billet in Tangshan dropped to 3,060 yuan per ton, while 20MnSi billet fell to 3,180 yuan per ton. With raw material prices continuing to fall, the cost support for steel prices has weakened, leading to increased market pessimism.
Third, there has been little progress in reducing steel production. Although many steel mills have announced maintenance plans this month, actual production levels have not dropped significantly. According to data from the China Iron and Steel Association, crude steel output from key large and medium-sized enterprises rose to 1.748 million tons per day in May, up 2.71% from April. National estimates show a 3.02% increase compared to the previous period, with daily output reaching a record high. This indicates that production cuts have not been substantial enough to ease market pressure. Weak demand means that even with planned shutdowns, steel mills are still producing at high levels, further pressuring the market.
Fourth, financial pressure on traders is growing. With prolonged price declines, many companies are facing losses and tight capital chains. Some traders are nearing the breaking point, and keeping low inventory has become the norm. The role of steel traders as market stabilizers has diminished, reducing the flow of resources and increasing financial strain. As the end of the month approaches, traders are forced to cut prices further to raise cash and secure future orders.
Overall, with weak demand, rising inventory, and falling raw material prices, the steel market is under significant downward pressure. The bearish sentiment is strong, and without clear signs of improvement, steel prices are likely to continue declining in the short term.