SunSirs: The Seasonal Peak for Construction Steels Have Already Passed, Prices Continue Fluctuating and Weakening in the Short Term

Price trend

According to price monitoring by SunSirs, the construction steel market exhibited a volatile yet generally weak trend last week (May 8–15). The price levels for both futures and spot markets shifted downward compared to the previous week, and market sentiment transitioned from the bullish optimism observed after the holiday period to a cautious, wait-and-see stance. As of the 15th, the average price of HRB400 rebar in the Jiangsu-Zhejiang-Shanghai region stood at approximately 3,261.16 RMB/ton—a week-on-week decline of 0.6%; meanwhile, the average price of HPB300 high-speed wire rod was 3,415 RMB/ton, marking a week-on-week increase of 0.15%.

In the spot market, as of May 9—following a national average price of 3,484 RMB/ton across 31 cities for rebar on May 8—market performance in subsequent trading days remained generally stable but trended slightly weaker. Regionally, price trends exhibited a degree of divergence between the North and the South: in the North, prices proved relatively resilient, bolstered by the continuation of the peak construction season and cost-side support; conversely, in the South, prices faced more pronounced downward pressure due to the approaching rainy season.

In the futures market, on May 8, the benchmark RB2610 rebar contract on the Shanghai Futures Exchange (SHFE) closed at 3,263 RMB/ton—an increase of 10 RMB/ton from the previous trading day—while open interest rose by 33,758 lots; immediately following the holiday break, bullish sentiment among market participants was notably strong. However, market momentum subsequently began to wane; by May 14, the benchmark RB2610 contract had retreated to a closing price of 3,255 RMB/ton, marking a cumulative decline of approximately 8 RMB/ton over the five-day period. On May 15, the RB2610 contract continued to trade within a weak and volatile range, ultimately recording a daily loss of 0.43%.

In terms of market turnover, trading activity has trended toward a lull following the dissipation of the post-holiday restocking surge. On May 14, the nationwide trading volume for construction steel totaled 92,852 tons—a sequential decline of 4.39% and a week-on-week decrease of 11.48%. End-users largely maintained a strategy of purchasing strictly to meet immediate, essential needs, while the market's acceptance of high-priced steel resources remained notably low.

Supply Side: Last week, rebar production rebounded to 2.014 million tons—a week-on-week increase of 47,500 tons—though it remains at its lowest level for this time of year in nearly four years. In terms of production processes, long-process steel mills continue to enjoy decent profit margins and maintain high production enthusiasm, with some lines that had previously undergone maintenance now resuming operations. Conversely, in the short-process sector, production growth remains limited as average profit margins for electric arc furnaces (EAFs) continue to hover within negative territory (-22 RMB/ton).

From a broader supply-side perspective, the average daily crude steel output of key steel enterprises stood at 2.11 million tons during the first ten days of May—a month-on-month increase of 3.6%. Overall, while supply has seen a moderate recovery, absolute levels remain low; consequently, the supply-side pressure exerted on the market in the short term remains relatively limited.

Regarding inventory, this sector stood out as a relatively strong performer among last week's fundamentals. Last week, total rebar inventory declined by 411,200 tons week-on-week—a significantly faster rate of destocking compared to the preceding period—bringing the total inventory level down to approximately 6.85 million tons. With inventory levels having trended downward for several consecutive weeks, supply pressure has seen a temporary alleviation. The primary driver behind this accelerated destocking was a substantial rebound in apparent demand, a trend also partly attributable to steel mills exercising greater control over their production pace.

Structurally speaking, both mill inventories and social inventories are undergoing destocking; inventory pressure is gradually shifting from the market end back toward the steel mills. Consequently, the overall inventory structure does not yet show the basis for any significant accumulation. However, with the approaching plum rain season in the southern region, a slowdown in the pace of destocking is a highly probable scenario.

On the demand side, apparent demand for rebar last week stood at 2.4252 million tons—a week-on-week increase of 447,100 tons, representing a significant surge. This notable rebound in demand was primarily driven by the fading impact of disruptions caused by the May Day holiday; specifically, the post-holiday release of restocking impulses provided a short-term boost. However, the absolute level of apparent demand—hovering around 2.44 million tons—remains at its lowest point for this time of year in nearly four years. Data from the China Iron and Steel Association (CISA) indicates that in early May, steel inventories held by key steel enterprises totaled 16.88 million tons—a 9.4% increase from the previous ten-day period—while terminal demand failed to demonstrate an expansion of comparable magnitude.

Based on high-frequency indicators, while cement shipments rose 7.53% month-on-month, they declined 18.67% year-on-year; meanwhile, the capacity utilization rate at concrete mixing plants continues to fall year-on-year, indicating that actual demand from the downstream construction sector remains weak.

Market Summary and Outlook

In summary, the building materials market is currently situated within a typical "window of contention," characterized by the coexistence of improving fundamentals and expectations of seasonal weakness. In the short term, cost support and the pace of inventory reduction continue to provide a floor for prices, though upward momentum remains notably insufficient. In the medium term, a triple pressure—comprising weakening demand during the rainy season, a moderate recovery in supply, and a slowdown in inventory reduction—is expected to gradually manifest. Consequently, rebar and wire rod prices are projected to maintain a weak, volatile trend in the near term, with their price center likely shifting moderately downward.

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