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Market Overview
As mid-March arrives, the steel market remains caught in a delicate balance: weekly consumption of five major steel products has surged to 9.07 million tons, a yearly high, yet 64% of traders report actual order growth below 5%. Official data reveals a 1.5% YoY drop in crude steel output to 166.3 million tons for January-February 2025, while finished steel production defied the trend with a 4.7% increase to 224.1 million tons, highlighting the growing role of electric arc furnaces (now 23% of total capacity). The core question now is whether the current 53.25% mill profitability can sustain production growth and whether the 17.88 million ton inventory level signals pricing flexibility.
Accelerated Output Recovery
Daily output of five major steel products reaches 1.236 million tons (+1.4% WoW)
EAF utilization climbs to 58%, with scrap consumption up 9.2% WoW
Hebei and Jiangsu contribute 75% of incremental production; Tangshan BF utilization hits 79.3%
Profit-Driven Dynamics
Rebar cash margins hold at 180-220 RMB/ton, a safe threshold
HRC margins shrink to 90 RMB/ton, triggering flexible production adjustments
Industry paradox: 53% profitable mills face rising inventory pressure (index at 62/100)
Decoding Destocking
Total inventories drop to 17.88 million tons (-2.3% WoW), 24% below 2024 levels
Construction steel inventory turnover falls to 8.7 days (vs 11.3 days YoY)
Cold-rolled/Hot-rolled inventory ratio at 1:2.15 reflects structural manufacturing demand recovery
Hidden Risks
Port pledge inventories surge to 4.2 million tons (+35% YoY)
Southern rainstorms delay 230,000 tons of in-transit resources
Arbitrage positions lock 1.5 million tons of social stocks
Improved Funding Availability
Non-property project funding ratio rises to 57.05% (+1.41pp WoW)
Hydropower/tunnel projects drive 42% of construction steel demand
Property sector funding stagnates at 47.23%, with private developers below 30%
Consumption Drivers
| Sector | Weekly Growth | Key Catalysts |
|---|---|---|
| Infrastructure | +7.8% | Accelerated special bond disbursements (40% Q1 allocation) |
| Manufacturing | +4.2% | Equipment renewal policies |
| Exports | +3.5% | Southeast Asia's infrastructure cycle |
1. Cost Pressures
Iron ore's $120/t battle: 128 million ton port stocks vs recovering Australian shipments
Coke's 11th price cut dilemma: 65% loss-making cokers near capacity exit thresholds
2. Policy Catalysts
Progress on 500B RMB ultra-long-term bond issuance
Effectiveness of property financing coordination mechanisms
Potential export tax rebate adjustments (rumored 13% for cold-rolled sheets)
3. Weather Disruptions
Southern rains delay 450,000 tons of demand
Northern sandstorms impact logistics efficiency
Key Product Ranges
Rebar: 3,680-3,920 RMB/ton (breakout requires daily sales >250,000 tons)
HRC: 3,450-3,620 RMB/ton (auto sheet orders critical)
CRC: 4,150-4,350 RMB/ton (sensitive to appliance subsidies)
Actionable Strategies
Mills: Maintain 85% BF utilization; optimize EAF operations during off-peak hours
Traders: Build HRC-rebar spread positions (target >600 RMB gap)
End-users: Adopt 4:3:3 pricing mix (spot/1-month/3-month contracts)
