Peak season expectations collide with weak demand, and the steel market pulls back from highs in the off-season

In the 25th week of 2023, the market prices of major steel products in some parts of the country have been adjusted back to high levels. Compared with last week, the rising varieties decreased significantly, the flat varieties increased, and the falling varieties increased significantly. The domestic iron and steel raw material market was stable with some declines. The price of iron ore fell by 5 yuan, the price of coke remained stable, the price of scrap steel remained stable, and the price of steel billet fell by 40 yuan.
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At present, although the Federal Reserve has suspended interest rate hikes, the central banks of the United Kingdom, Norway, Switzerland, and Turkey continue to raise interest rates, indicating that inflationary pressures in Europe and the United States are still high, and the global economy is still facing the risk of recession. On June 16, the executive meeting of the State Council was held. The meeting pointed out that the external environment of my country’s economy is more complicated and severe, and the slowdown of global trade and investment will directly affect the process of my country’s economic recovery. The slope of the economic recovery is weakening. Insufficient confidence and other factors have superimposed, making the recent domestic economic performance worse than expected. Therefore, the Standing Committee of the State Council emphasized that in response to changes in the economic situation, more forceful measures must be taken to enhance development momentum, optimize the economic structure, and promote sustained economic recovery. In particular, the “interest rate cut” was first launched, which is regarded by the market as the beginning of another increase in the policy of stabilizing growth. For the steel market, although the “interest rate cut” is implemented as scheduled, the market is more concerned about the introduction of follow-up policies, and the game between the strong expectations of the policies and the weak off-season reality is obvious.
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In the short term, the domestic steel market will present a pattern of “weakening economic recovery, insufficient off-season demand, first implementation of interest rate cuts, more follow-up policies, and lingering external risks”.
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From the perspective of the supply side, due to the promotion of the profit-seeking effect, the willingness of steel mills to release production capacity is still strong, and the short-term supply side will show strong resilience.
From the perspective of demand, due to the high temperature in the north and the rainy weather in the south, the effective construction progress of the project will be affected, and the pace of terminal demand procurement will also slow down.
From the cost point of view, iron ore fluctuated slightly, scrap steel prices were stable and fell, and coke prices were stable, which made the cost support begin to show signs of weakening. It is expected that this week (2023.6.26-6.30) the domestic steel market will experience a high correction, but it cannot be ruled out that some regions or varieties will rise slightly due to better transactions.