Since July, positive signals from domestic macroeconomic messages have continuously fueled market optimism. While some economic data in June showed signs of weakness and inflationary expectations gradually cooled down, a new wave of sentiment emerged after Premier Li Keqiang's speech at the grassroots level, which sparked expectations of potential stimulus measures. The Shanghai Composite Index surged by 3.23%, and steel prices began to rise steadily. Steel mills also responded with price adjustments, raising ex-factory prices for certain products. The question remains: will this upward trend be short-lived or will it continue?
Economic indicators continue to show weakness, suggesting that the pace of economic growth is slowing further, indicating that the domestic situation may be deteriorating. During the mid-year period, Premier Li emphasized the importance of "stabilizing growth, promoting structural adjustment, and reform." He highlighted that economic growth rates 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, although it was misinterpreted as a sign of upcoming stimulus measures.
However, it is important to note that the market’s optimism is not based on immediate stimulus policies, which are unlikely to be introduced soon. Instead, the focus is on long-term goals such as scientific development, structural adjustment, energy conservation, and emission reduction. These reforms aim to eliminate outdated production capacity and promote cleaner production methods. Although the process may be painful and challenging, many enterprises have already begun to take advantage of recent reforms. As a result, some companies are actively driving the market forward.
On July 10, Wuhan Iron and Steel became the first major steelmaker to announce an August price policy, raising ex-factory prices for several products by RMB 50-180 per ton. For example, hot rolled auto dual-phase steel (RCL590F) saw an increase of RMB 180 per ton, while cold-rolled coils were raised by RMB 80 per ton. Just a day later, Shagang also announced price increases for construction materials, including rebar by RMB 80 per ton and high-line and coil by RMB 120 per ton. Baosteel, on the other hand, maintained stable ex-factory prices for carbon steel sheets in August after two months of declines. These moves indicate that steelmakers are optimistic about the market outlook and are working to warm up the market.
According to the China Iron and Steel Association, crude steel output increased in June, reaching a near-historical high. Major steel enterprises produced an average of 1.7624 million tons daily in the second half of June, representing a 0.97% increase compared to the previous period. Despite this, concerns remain about overcapacity and its impact on market confidence. However, steelmakers seem confident in their current production levels and strategies.
In terms of raw material costs, iron ore prices have continued to rise. Brazilian iron ore at 65% grade reached 925 yuan per ton, while Indian ore at 63.5% grade was priced at 875 yuan per ton. The Platts index rose to 125 dollars, up 2 dollars from the previous week. Other raw materials, such as coking coal and scrap metal, also saw price increases, providing strong cost support for steelmakers.
Regarding liquidity, the central bank conducted zero open market operations this week, leading to no net funds entering the market. The overnight repo rate stood at 3.8%, a slight increase from the previous trading day. Meanwhile, the State Council released guidelines supporting economic restructuring and transformation, and the China Banking Regulatory Commission proposed ten measures to revitalize stock funds. These developments suggest that while the overall funding environment remains moderately tight, there is targeted support for key sectors.
Despite these factors, the economy is expected to continue slowing down, and stimulus measures are unlikely to be introduced in the near term. Instead, the focus will remain on long-term reforms and structural upgrades. While short-term demand remains sluggish, the steel market is expected to maintain a slightly upward trend in the long run.
Wuhan Iron and Steel led the way in raising ex-factory prices in August, followed by Baosteel and Shagang. These price increases reflect growing confidence among steelmakers in the future market outlook. Analysts noted that steel mills have shifted from previous pricing strategies, showing a more bullish stance in the off-season. This suggests that the steel market is stabilizing and gaining momentum.
Steel prices saw their biggest weekly gains in months, with construction steel rising by 40–75 yuan per ton and plate and hot-rolled steel increasing by 25–45 yuan per ton. The rebound in steel prices has been significant, and while there has been some cooling, active price cuts remain rare.
The increase in raw material costs, particularly imported iron ore, has forced steelmakers to raise ex-factory prices to offset rising production costs. With iron ore prices up by around 10% compared to the same period last month, steelmakers are passing these costs onto downstream markets.
Looking ahead, the second half of the year may bring challenges, but it also presents opportunities. With environmental regulations tightening and government policies supporting infrastructure and urbanization, the steel industry is expected to see increased demand. These factors are contributing to a more optimistic outlook for the steel market.
Overall, the steel market is in a recovery phase, and the worst of the year may have passed. Steel prices are unlikely to decline sharply in the near future, and as spot prices stabilize, steelmakers are likely to continue raising ex-factory prices to expand profit margins. This suggests that the next phase of price increases will likely be steady and sustained.
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