It is expected that in February, affected by the Spring Festival holiday, the steel industry will continue its off-season performance, with weak steel demand, a further decline in enterprise production, and a slight fluctuation in the prices of raw materials and finished products.
According to the data surveyed and released by the Iron and Steel Logistics Professional Committee of China Federation of Logistics and Purchasing, the PMI of the steel industry in January 2026 was 49.9%. Although it was still below 50%, it rose by 3.6 percentage points month-on-month, approaching the theoretical critical point of 50%. This indicates that although the steel industry continued to contract, the contraction momentum slowed down significantly. Changes in sub-indices show that both supply and demand operated at a low level and stabilized, but the weak pattern remained unchanged. The decline in raw material prices slowed down, and steel prices fluctuated slightly. It is expected that in February, affected by the Spring Festival holiday, the steel industry will continue the off-season market. The demand for steel will operate weakly, enterprise production will decline again, and the prices of raw materials and finished products will show a slight fluctuation trend.
Pan Fujie, Director of the Steel Logistics Professional Committee of China Federation of Logistics and Purchasing, believes that in January, the steel industry was still in the traditional off-season. In terms of demand, the low temperature and the approaching Spring Festival jointly restricted the release of demand, but some infrastructure projects rushing to complete and the downstream industries replenishing stocks still contributed to a certain amount of steel demand; the export end was under pressure due to policies and weak overseas demand, and the terminal demand still had some release, but it did not form a continuous volume increase. On the supply side, the environmental protection production restriction policy continued in the heating season but was not intensified, the contraction of production activities slowed down significantly, and the output rebounded compared with the same period last month. The finished product inventory accumulated, and the inventory pressure became apparent. The recovery of steel mill production drove the release of procurement demand, the price of raw materials stabilized to some extent, while the price of steel rose first and then fell with changes in demand. As the Spring Festival holiday approaches, the scope of downstream shutdowns and holidays will expand, the steel industry will enter the weakest demand period of the year, the pattern of both weak supply and demand will reappear, and the industry operation is still in a transitional period of weak recovery.
Steel demand has stabilized and rebounded, while exports have continued to shrink. January is a traditional off-season for the steel industry. Although positive policy signals in the real estate sector continue to be released, the tight situation has not been fundamentally reversed in the short term, and the support for steel demand remains limited. Affected by the drop in temperature and the approaching Spring Festival, outdoor construction work has slowed down significantly. Although winter stockpiling has started, the overall situation is still below expectations. However, some infrastructure projects rushed to complete within the month, the rigid restocking demand in downstream industries was released, and the market's expectation for steel demand rose in the first year of the "15th Five-Year Plan", which still provided good support for steel demand. On the whole, the steel demand side has operated steadily. The new order index was 50.2%, up 4.8 percentage points month-on-month, returning to the expansion range after 5 months. In terms of exports, affected by the implementation of the new policy on steel export licenses, the pace of enterprise order processing has slowed down, and China's steel exports have been under phased pressure. The new export order index was 37.9%, down 3.1 percentage points month-on-month, falling for 3 consecutive months, indicating that steel exports have continued to shrink. In terms of end demand, according to Shanghai Zhuogang Chain, domestic end demand in January showed north-south differences due to seasonal factors, but the performance in normal construction areas was acceptable. Taking the procurement of terminal wire rods and rebars in Shanghai as an example, it rose slightly by 7.4% in January compared with the previous month, but showed a trend of first high and then low within the month.
Steel mills have resumed stable production, and product inventories have accumulated to some extent. In January, as demand stabilized and rebounded, steel mills' demand for stocking up before the Spring Festival started. The environmental protection production restriction policies during the heating season were not further intensified, and some steel mills that had undergone maintenance in the early stage gradually resumed their production rhythm. The contraction trend in the steel industry's production slowed down significantly. The production index stood at 48.4%, up 4.7 percentage points month-on-month, ending the declining trend for two consecutive months, indicating that steel mills' production activities have returned to stable operation. According to data from the China Iron and Steel Association, in the first ten days of January, key steel enterprises had an average daily output of 1.997 million tons of crude steel, a month-on-month increase of 21.6%; the average daily output of pig iron was 1.762 million tons, a month-on-month increase of 5.5%; the average daily output of steel products was 1.822 million tons, a month-on-month decrease of 3.7%. By the middle ten days, key steel enterprises had an average daily output of 1.979 million tons of crude steel, a month-on-month decrease of 0.9%; the average daily output of pig iron was 1.794 million tons, a month-on-month increase of 1.8%; the average daily output of steel products was 1.877 million tons, a month-on-month increase of 3%. Overall, the output increased compared with the previous month. With the increase in output, the pace of digesting finished product inventories slowed down. The finished product inventory index was 52.2%, up 6.1 percentage points month-on-month, returning to the expansion range after three months. According to data from the China Iron and Steel Association, in the middle ten days of January, the steel product inventory of key enterprises was 16.13 million tons, an increase of 1.09 million tons compared with the previous ten days, and an increase of 0.12 million tons compared with the same period of the previous month. This indicates that as the Spring Festival approaches, finished product inventories have accumulated periodically, and inventory pressure has become apparent.
Raw material procurement activities have picked up, and the decline in raw material prices has narrowed. In January, steel mills resumed stable production with a slight marginal increase in output, which drove up raw material procurement activities. The procurement volume index stood at 57.9%, up 13.4 percentage points month-on-month. It returned to the expansion range after 4 months and hit a new high in nearly 7 years, indicating that steel mills significantly increased their raw material procurement efforts. Driven by this, the decline in raw material prices narrowed significantly. The purchase price index rose to 44.3%, up 13.7 percentage points month-on-month, but it still remained in the contraction range, indicating that the overall price of the raw material market was still weak. By variety, ore prices stopped falling and stabilized supported by the increase in procurement demand from steel mills; the operating rate of electric arc furnace steel mills rebounded from the previous month, and the demand for scrap steel increased accordingly, which led to the end of the continuous weak trend of scrap steel prices and a slight recovery; the tight supply pattern of coking coal has not fundamentally changed, but the price still dropped significantly from the previous month. Overall, although the prices of iron and steel raw materials in January were still in the contraction range, the downward trend was curbed, and the decline narrowed.
The price of steel first rose and then fell, with a slight monthly decline. In January, domestic steel market demand showed a trend of first rising and then falling, and transactions declined at the end of the month as the Spring Festival approached. The price of steel also showed the same trend. According to the Shanghai rebar price index, the price was 3,216 yuan/ton on January 4, then fluctuated upward, reaching the monthly high of 3,234 yuan/ton on January 8. After that, as the weather turned cold and the Spring Festival drew near, the price fluctuated downward, standing at 3,196 yuan/ton on January 26. The monthly price showed a trend of first rising and then falling, with an overall slight decline compared with the beginning of the month.
It is expected that in February 2026, the demand for steel will show a weak operating trend. The suppressing factors on the demand side will manifest themselves in a concentrated manner. Firstly, the seasonal effect of the Spring Festival holiday will be fully released. The middle of February is the Spring Festival holiday. Before the holiday, a large number of downstream construction sites and manufacturing enterprises will stop work and take holidays. Terminal steel procurement will basically come to a standstill, and traders' winter storage will also enter the final stage, making the demand for construction steel drop to a stage low. There may be a lag in resumption of work after the holiday. Most infrastructure and housing construction enterprises plan to resume work after the Lantern Festival. It will take time for workers to return to their posts and funds to be in place, so the construction rhythm will be difficult to recover quickly, and there will be a lag in the release of demand. Secondly, the process of bottoming out and stabilizing the real estate industry is still slow. The tight capital chain of the industry has not been fundamentally improved. Real estate enterprises are still cautious about acquiring land and starting construction. The number of new projects started after the holiday is relatively small, and the market is still dominated by ongoing projects, which has a relatively weak supporting effect on the demand for construction steel. Thirdly, the pressure on the external demand market remains unchanged. After the implementation of the steel export license system, the export volume of low-value-added steel billets and primary steel products has shrunk significantly. During the Spring Festival holiday, the efficiency of links such as port logistics, customs declaration and clearance has decreased, and the short-term export delivery rhythm has slowed down. Overall, in February 2026, multiple factors such as the seasonal suppression of the Spring Festival holiday, the continued downturn of the real estate market, the pressure on external demand, and the lag in resumption of work after the holiday are intertwined. The overall demand for steel remains weak, the release of actual effective demand is limited, and the industry is still in a transition period of demand recovery.
Steel mill production may decline again. In February, the environmental protection production restriction policy during the northern heating season is still ongoing. Meanwhile, the Spring Festival holiday will arrive in mid-February. Before the festival, most steel mills will cooperate with the peak-shifting production for the Spring Festival. Some small and medium-sized steel mills will stop production in advance for maintenance and arrange equipment maintenance. Coupled with the shrinking demand for steel products and the stagnation of downstream procurement, steel mills' willingness to produce continues to be weak, and they take the initiative to reduce production load. After the festival, with the end of the Spring Festival holiday, the steel mills that stopped production earlier will gradually start to resume production. The return of workers and equipment debugging will proceed step by step, but there may be a lag in the resumption of production, and it will be difficult to return to the normal level in the short term. Overall, steel mill production will show a downward trend.
The prices of raw materials and steel products show a slight fluctuation trend. In February, the slowdown in steel mill production before the holiday will lead to a corresponding slowdown or even stagnation in raw material procurement. The shutdown of downstream construction sites and manufacturing enterprises has led to the basically stagnant procurement of end-use steel products. The winter stockpiling by traders has also entered the final stage, resulting in an extremely weak market trading atmosphere. However, there is a lag period in the resumption of work and production after the holiday, which will not have a significant impact on prices in the short term. It is expected that the prices of both raw materials and finished products will maintain a slight fluctuation trend.
