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The arrival of March traditionally signals the beginning of peak steel demand season in China. However, against the backdrop of complex domestic and international economic conditions, coupled with dynamic supply-demand adjustments, market participants remain divided on whether policy tailwinds from ongoing high-level meetings can catalyze meaningful price increases. This analysis examines critical price drivers across four dimensions.
Post-Spring Festival iron ore prices have shown tentative stabilization after a rollercoaster trajectory, with Mysteel's 62% Fe index hovering at $112-115/dry metric ton. While coking coal declines have moderated (-4% MoM), the market anticipates at least two more coke price cuts totaling 100-150 RMB/ton, potentially boosting mill margins to 12-15%. Scrap steel prices remain rangebound at 2,850-2,900 RMB/ton, though southern markets show 1.5% weekly declines due to improved collection logistics.
Operational data reveals shifting production patterns: 15 blast furnaces resumed operations last week versus 7 new maintenance halts, pushing capacity utilization to 78.3% (+2.1pp WoW). Mills are cautiously capitalizing on improved profitability, with average cash margins reaching 180 RMB/ton for rebar producers - the highest since November 2023.
Construction activity shows early recovery signals, with Mysteel's site survey indicating 68% of infrastructure projects achieving full workforce mobilization (vs 53% in February). Rebar demand is projected to grow 18-22% MoM, driven by:
3,200 km of new high-speed rail construction starts
48 major hydropower facility upgrades
Accelerated "sponge city" drainage system deployments
However, property market headwinds persist. New housing starts remain 39% below 2021 levels, with steel intensity per square meter dropping to 48kg (from 55kg) due to lightweight design trends. Environmental inspections add production uncertainty - Tangshan's latest emission curbs have already idled 23 sintering plants, potentially trimming regional output by 1.2-1.5 million tons monthly.
Traders exhibit cautious optimism, maintaining inventories at 22-day coverage (vs 30-day pre-festival levels). Futures markets show divergence:
Rebar May contracts gained 2.3% WoW to 3,880 RMB/ton
Hot-rolled coil remained flat at 4,020 RMB
Iron ore futures slipped 1.8% on oversupply concerns
Notably, export orders demonstrate resilience despite global trade tensions. March's forward bookings reached 850,000 tons (+15% MoM), with Middle East and ASEAN markets absorbing 73% of shipments. Domestic traders report increasing use of price hedging tools, with 38% of transactions now involving futures-linked pricing clauses.
Market trajectory hinges on three key developments:
Policy Implementation Pace: Project funding disbursements under the 1 trillion RMB special bond program
Raw Material Floor: Iron ore's $105-108/t support level holding against recovering Australian shipments
Inventory Health: Current 18.7 million ton stockpile (-24% YoY) providing price stability
Base case projections suggest:
Rebar: 3,850-4,100 RMB/ton range
HRC: 4,000-4,250 RMB
Potential 4-6% upside if infrastructure stimulus accelerates
