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H1 Pressures Meet H2 Opportunities in Critical Market Shift
National average prices settled at ¥4,246/ton by June - a ¥194/ton drop since January, yet outperforming most steel products. The decline was steepest in Q2 as demand faltered. Profitability fractured sharply: processing mills bled ¥50/ton losses (down ¥180/year), while integrated mills held ¥238/ton margins. Exports emerged as the bright spot - 2.46 million tons shipped Jan-May (13.65% YoY surge), led by oil/gas pipes with 20.22% growth.
Output climbed 7.04% YoY to 8.54 million tons despite margin pressure. Capacity growth continues relentlessly with 115,000 tons new capacity and 3 production lines launching in 2025. The landmark development remains Hengyang Steel's 800,000-ton mega-facility - now the world's largest hot-roll line. Key state-owned mills increased production 5.4% Jan-Apr, signaling robust specialty seamless pipe demand.
Mills maintained stockpiles at 722,600 tons - well below 2023-24 levels. Traders demonstrated even stricter control, driving social inventories down 62,000 tons YoY to 688,900 tons. This "lean operations" mindset created crucial market stability amid price volatility.
Daily trading volume grew 5.26% to 14,323 tons, powered by non-construction sectors:
Oil/gas extraction (+20.22% export growth)
Shipbuilding (record order backlogs)
Boiler/mechanical applications (+43.84% boiler pipe exports) This diversification shielded the sector from real estate slowdowns.
Supply-Demand Rebalance Production will reach 30.5 million tons annually but face two counterforces: new capacity additions versus potential maintenance cuts as mills defend margins. Exports should hit 5.8+ million tons with oil/gas pipelines remaining the growth engine.
Price Recovery Catalysts
Cost Floor Formation: Billet prices firmed ¥30-50/ton in July
Inventory Normalization: Traders must replenish at ¥4,250+ levels
Seasonal Demand Shift: Infrastructure stimulus typically lifts Q4 orders
Critical Threshold Sustainable recovery requires breaking ¥4,300/ton resistance - currently challenged by trader caution. Success hinges on translating export strength (580K tons/month) into domestic pricing power.
► Traders: Rotate stocks before Q4; prioritize oil/gas grades
► Mills: Delay new capacity startups until margin recovery
► Buyers: Secure volume below ¥4,280 before seasonal surge
⚠️ Make-or-Break Watch: Processing mills must sustain July's fragile profitability (Shandong: ¥40/ton profit) to prevent supply disruptions.
