Since July, positive signals from domestic macroeconomic messages have gradually emerged, boosting market sentiment. Although some economic data in June showed signs of weakness and inflationary expectations slowly cooled down, a new wave of optimism was sparked by Premier Li Keqiang's speech at the grassroots level, which led to increased anticipation for potential stimulus measures. The Shanghai Composite Index surged by 3.23%, and steel prices also rose steadily. Steel mills began to adjust their pricing strategies, raising ex-factory prices. However, it remains uncertain whether this price increase will be short-lived or sustained over time.
Economic data continued to show weakness, suggesting that the growth rate may continue to slow down, indicating further deterioration in the domestic economy. During the mid-year period, Premier Li emphasized the importance of "stabilizing growth, promoting structural adjustments, and advancing reforms." He stressed that economic growth and employment levels should not fall below the "lower limit," while inflation should remain within the "upper limit." This message brought hope to the market, but it was misinterpreted as a sign of upcoming stimulus policies. While the market is optimistic and expectations are high, it is unlikely that direct stimulus measures will be introduced in the short term. Instead, the focus is on scientific development, structural adjustment, energy conservation, and emission reduction to promote long-term sustainable growth.
On July 10, Wuhan Iron and Steel became the first to announce an August steel product reservation policy, increasing ex-factory prices for certain products by RMB 50–180 per ton. For example, hot rolled auto dual-phase steel RCL590F was raised by RMB 180 per ton, and cold-rolled coil by RMB 80 per ton. Shortly after, on July 11, Shagang also raised building material prices by RMB 80–120 per ton, including rebar by RMB 80 per ton and high-line and coil by RMB 120 per ton. Meanwhile, Baosteel had previously reduced ex-factory prices for two months, but in August, carbon steel sheet prices remained flat. Overall, steel mills raised prices steadily, expressing confidence in the future market outlook.
According to statistics from the China Iron and Steel Association, crude steel production in June increased, with major steel enterprises producing an average of 1.7624 million tons daily, up 0.97% compared to the previous period. This marked one of the highest levels in recent history. Despite the high output, steelmakers did not seem concerned about overcapacity, as they maintained strong confidence in the current market. However, the daily output of non-key steel companies remained stable, showing no significant changes compared to May. What about the situation regarding raw materials and capital?
As of July 13, iron ore prices stood at 925 yuan/ton for 65% Brazilian ore and 875 yuan/ton for 63.5% Indian ore. The Platts index reached $125, up $2 from the previous week. Alloy billet prices were around 3,200 yuan, while general carbon billet prices were approximately 3,120 yuan. Scrap prices averaged 2,280 yuan/ton, and coking coal prices were around 1,224 yuan/ton. Raw material prices continued to rebound, providing stronger cost support.
In terms of capital, the central bank conducted zero open market operations this week, resulting in no net funds injected into the market. The overnight repo rate stood at 3.8%, up 20 basis points from the previous trading day. Last week, the State Council issued guiding opinions on financial support for economic restructuring and transformation. The China Banking Regulatory Commission proposed ten measures to revitalize stock funds. In early July, four major banks added 168 billion yuan in credit for the entire month of June, indicating that market liquidity remained tight but targeted.
Despite these factors, the economy is expected to continue slowing down, and no large-scale stimulus measures are likely to be introduced soon. Instead, reforms will intensify, shaping the long-term direction of development. While short-term demand remains sluggish, the overall trend of the steel market is slightly upward. The recent price increases by steel mills reflect growing confidence in the market, even though downstream demand has yet to fully support the current bullish sentiment. Many institutions have lowered their GDP growth forecasts, and the official second-quarter GDP figures have not been released yet. The mid-year economic conference is still pending, so the market may either heat up or experience a temporary spike—what many analysts call a "triggered heartbeat."
In conclusion, the steel market is currently in a recovery phase. It is reasonable to assume that the worst period of the year has passed, and steel prices are unlikely to decline significantly in the near future. With spot prices stabilizing, steel companies are following the trend to raise ex-factory prices and expand profit margins. Therefore, we believe that other steel mills will likely follow suit, leading to a continued rise in steel prices and a more stable market bottom.
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