Price trend

Last week, hot rolled sheet and coil prices experienced a slight decline. According to the business data analysis system of SunSirs, as of January 16th, the average price of domestic hot rolled sheet and coil was 3,316 RMB/ton, a week-on-week increase of 0.484%; the average price of domestic cold rolled sheet was 3867.5 RMB/ton, a week-on-week decrease of 0.386%.

Factors influencing price changes:

Fundamentals

According to the latest data obtained by SunSirs, last week's hot rolled steel social inventory was 285.8 tons, a week-on-week decrease of 50,100 tons, and weekly production was 3.0836 million tons, a week-on-week increase of 28,500 tons; last week's cold rolled steel social inventory was 1.2364 million tons, a week-on-week decrease of 6,100 tons, and weekly production was 888,400 tons, a week-on-week increase of 23,600 tons.

Last week, the supply of the five major steel product categories totaled 8.1921 million tons, a week-on-week increase of 0.062 million tons, or 0.1%; total inventory was 12.4701 million tons, a week-on-week decrease of 0.0691 million tons, or 0.6%; and apparent consumption was 8.2612 million tons, a week-on-week increase of 3.7%.

According to data from the China Iron and Steel Association, in the first ten days of January 2026, key steel enterprises produced a total of 19.97 million tons of crude steel, with an average daily output of 1.997 million tons, a 21.6% increase compared to the previous ten-day period; steel inventory reached 15.04 million tons, an increase of 900,000 tons or 6.4% compared to the previous ten-day period.

Last week, the inventory of steel billets at major warehouses and ports in Tangshan totaled 1.6128 million tons, an increase of 83,900 tons compared to the previous week. During the survey period, downstream transactions of finished steel products made from billets were hindered, leading to weaker demand for billets. Manufacturers primarily focused on consuming their in-house billet inventory, resulting in a continued accumulation of social inventory.

Cost side

Hot rolled steel underwent a period of concentrated maintenance in December, with production resuming in January. No significant reduction in output is expected in February. Steel mills were experiencing small losses, but not to the point of reaching marginal cost, so production restarts will continue. During this process, flat steel production remains a priority, which will continue to increase the marginal pressure on supply and demand during the production recovery cycle. This supply and demand structure may put pressure on apparent demand, which will rebound as production accelerates. In the future, a gradual decline will occur, with the peak in apparent demand acting as a constraint on expectations. As of January 16, steel mills had sufficient orders, but profit margins were difficult to achieve, creating a downward cycle. This situation is expected to persist until external factors boost consumer demand or production cuts occur. The industry is likely to face this challenge until the end of the year.

Market Outlook:

The current problems facing the steel market are: restocking during the off-season while raw material prices remain firm; weak demand during the off-season leading to increased inventory pressure; steel mills not experiencing significant losses, resulting in continued production increases; and low downstream inventories coupled with inactive purchasing, creating an inventory bottleneck effect. This structure indicates a lack of clear driving forces, making effective solutions difficult in the short term. On the macroeconomic front, domestic policies may be in a temporary vacuum, while overseas developments will primarily revolve around the US-China trade dynamics and interest rate policies, having a limited impact on ferrous commodities. Looking at the domestic market, it is expected that February prices will show a pattern of high-level decline followed by a rebound, with little change in the overall price level. The expected price range is between 3,180 and 3,350 RMB/ton.

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