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I. Macro Updates
1. Domestic Developments
Deposit Rate Cuts:
Major Chinese banks, including Bank of China, ICBC, and China Construction Bank, announced reductions in RMB deposit rates on May 20–21. One- and two-year term deposit rates were cut by 15 basis points (bps), aiming to ease banks’ net interest margin pressures and channel funds into the real economy, potentially lowering financing costs for manufacturers.
Outbound Investment Growth:
China’s outbound direct investment (ODI) rose 7.5% YoY in Jan-Apr 2025, with non-financial investment in Belt and Road Initiative (BRI) countries surging 16.4%. New overseas engineering contracts jumped 22.4% YoY, signaling strong demand for steel in infrastructure projects.
2. International Developments
ECB Rate Cut Expectations:
European Central Bank meeting minutes revealed support for a 50-bp rate cut to address slowing wage growth and tighter financial conditions. While this may boost Eurozone manufacturing sentiment, its impact on global commodities remains limited.
U.S. Economic Resilience:
The S&P Global U.S. Composite PMI rose to 53.1 in May (vs. 51.6 in April), indicating expansion in both manufacturing and services. However, tariff-driven price pressures persist, escalating global trade risks.
1. Iron Ore
Price Trends:
Tangshan 66% iron concentrate fell 0.31% WoW to RMB 956/ton;
Chengde vanadium-titanium powder dropped 2.21% WoW to RMB 885/ton.
Supply-Demand Analysis:
Supply: Australian and Brazilian iron ore shipments rebounded, signaling increased supply.
Demand: Steel mills maintained high molten iron output but adopted cautious procurement strategies, favoring mid-to-low grade ores.
Outlook: Prices likely to consolidate with limited volatility, supported by rigid demand but capped by supply growth.
2. Coal
Price Trends:
Shanxi quasi-primary wet-quenched metallurgical coke: RMB 1,130–1,250/ton;
Primary dry-quenched coke: RMB 1,395–1,505/ton.
Thermal coal prices stabilized amid sufficient supply.
Supply-Demand Analysis:
National coal mine capacity utilization reached 97.1%, with daily output at 5.842 million tons.
Traders remained cautious, adjusting inventories based on orders.
Outlook: Weak demand and ample supply to keep coking coal and thermal coal prices range-bound.
1. Cost Pressures
Iron Ore: Rising supply limits upside, but mill restocking provides floor support.
Coal: Weak coke prices constrain profit recovery for steelmakers.
2. Demand Drivers
Domestic: BRI infrastructure projects bolster steel demand, but southern China’s rainy season dampens construction activity.
Global: U.S. economic resilience may lift export orders, though tariff risks loom.
3. Policy & Sentiment
Rate Cuts: Lower financing costs may gradually benefit manufacturers, but demand recovery lags.
Market Sentiment: Traders stay cautious, prioritizing inventory management over speculative restocking.
Seamless Pipes:
Southern China’s rains suppress demand, while northern infrastructure projects offer limited support.
Weak cost fundamentals (iron ore, coal) to drive prices lower.
Other Steel Products:
Rebar/Wire Rod: Southern demand slump pressures prices.
Hot-Rolled Coil: Export resilience offsets weak domestic restocking.
Key Risks:
Prolonged southern rains disrupting construction.
Insufficient mill production cuts leading to inventory buildup.
Geopolitical tensions or tariff shocks impacting raw material costs.
Conclusion:
China’s steel market faces continued "weak supply and weaker demand" dynamics. Seamless pipe prices are expected to trend lower, constrained by tepid consumption and soft cost support. Traders should optimize inventory levels, while mills need flexible production plans to navigate seasonal headwinds.
