Steel Demand May Still Be Pressured This Week

The market saw sluggish terminal demand and the mixture of bullish and bearish news. Ferrous products prices remained rangebound as a whole last week. In terms of raw materials, the third round of coke price cut was completed, and the prices will meet greater resistance if it were to fall further. The prices of iron ore and steel scrap stood high. On the finished product side, steel prices fluctuated within a narrow range last week. Although the profits of steel mills rebounded slowly, they are still at a low level. And the increase in supply is insignificant. Although there existed some opportunities for speculation, the real terminal demand stood sluggish.
Rebar output dropped significantly last week in light of poor profits and spreading COVID in north China. In terms of rebar, the prices of finished products dropped sharply, while the prices of steel scrap remained stable, hence the profits of EAF-based steel mills were greatly squeezed. The repeating COVID in north China also forced some BF mills to suspend the production. As such, the overall supply contracted. It is expected that the overall rebar output will remain low this week. The output of HRC was basically stable last week compared with a week ago with few changes. Looking ahead, under the policy of crude steel production cuts, domestic HRC supply is unlikely to fluctuate palpably.
Rebar and HRC demand both fell on repeating COVID and rising downward pressure on the economy. In terms of rebar, the real demand was poor and the consumption of spots was quite slow due to repeating COVID across the country. Going forward, the demand side will stay muted and steel prices are likely to fall further despite occasional speculation demand. The construction sites mostly purchased on demand, and short-term terminal demand is likely to be muted. In terms of HRC, the pandemic situation in east China has improved marginally recently, but the north and south-west China suffered from deteriorating COVID situation. In addition, the lower-than-expected economic data released last week has once again led to the accumulation of bearish sentiment, and the terminal demand was weak. In the short term, the pandemic situation is still evolving, and the downward pressure on the domestic economy has increased, and the downstream demand for HRC will continue to be pressured.