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The current rebound in steel prices
The steel market has experienced a prolonged decline since early March, with domestic steel prices hitting new yearly lows. Market sentiment remains weak, and traders are struggling with both inventory pressures and tight cash flow. Despite the expectation of a seasonal recovery, the market has remained sluggish, with merchants forced to cut sales prices in a bid to move stock. This has led to growing pessimism among traders, who now hold a bearish outlook on the market, further eroding confidence.
Meanwhile, capital markets, including futures and electronic trading platforms, have also seen sharp declines, intensifying the downward pressure on steel prices. End-users, facing continued price drops in the spot market, have become more cautious in their purchasing decisions, leading to lower demand and stagnant transaction volumes.
As of March 7, steel prices in Shanghai showed signs of weakness. The transaction price for 8mm HRB400 plate was 3,190 yuan/ton, down 70 yuan/ton from the previous weekend. Similarly, 6.5mm HRB300 high-line was priced at 3,170 yuan/ton, a decrease of 10 yuan/ton. The price of 20mm HRB400 rebar fell by 50 yuan/ton to 3,110 yuan/ton, while hot-rolled coil (5.5*1500 HRC) remained flat at 3,400 yuan/ton. The price of 1.0*1250 cold-rolled sheet dropped by 30 yuan/ton to 4,190 yuan/ton.
Since the Spring Festival, the steel spot market has been on a downward trend, with prices consistently falling. Several factors contribute to this situation: first, uncertain policy environments and weak demand have led to low trading volumes, making it difficult to support stable prices. Second, an oversupply of steel due to increased short-term arrivals has created a supply-demand imbalance, putting additional pressure on the market. Third, the ongoing four-month price drop has fueled trader pessimism, leading to panic selling. Lastly, credit issues within the steel trade sector have worsened, straining the financial health of many businesses.
Looking ahead, the steel market is expected to see some improvement. As the end of the winter season approaches, demand is beginning to pick up, and destocking efforts are gaining momentum. Major policy announcements are expected to provide clarity for downstream industries, encouraging them to plan production and business activities for the year. With warmer weather and the end of rainy seasons, operating rates are gradually increasing, leading to a slight rise in purchase demand.
Market feedback indicates that although prices are still declining overall, shipment volumes have improved compared to previous periods, resulting in a modest rebound in certain regions. Additionally, the total market inventory dropped to 20.57 million tons last week, ending a ten-week streak of rising stock levels, signaling the start of the destocking process.
Government policies are also expected to support a price rebound. Premier Li Keqiang’s 2014 government work report set a GDP growth target of 7.5%, signaling a commitment to avoiding sharp economic declines. A new fiscal deficit of 1.35 trillion yuan is aimed at stimulating domestic consumption, while social security housing development and urbanization initiatives will boost steel demand. Furthermore, the elimination of 27 million tons of outdated steel production capacity will help reduce supply pressures in the market.
Overall, as March progresses, there are signs of a slight recovery in market demand. With rising raw material prices, steel prices are expected to stabilize in the short term, offering a glimmer of hope for traders and investors alike.