SunSirs: Marginal Improvement in Supply and Demand—Steel Prices Poised to Rise Rather Than Fall

According to Custeel, the domestic steel market yesterday generally exhibited a pattern of narrow-range fluctuation with underlying stability. Futures markets saw mixed performance: rebar rose 0.26%, hot-rolled coils rose 0.15%, and iron ore remained flat, while coke fell 0.77% and coking coal fell 0.32%. In the spot market, prices remained largely stable nationwide, with only minor regional fluctuations; rebar prices in areas like Changchun and Kunming edged up by 10RMB/ton, while most traders kept quotes steady. Trading activity was lackluster due to the high-temperature off-season, with daily transaction volumes for construction steel among major traders seeing a slight month-on-month decline. However, inventory data showed positive shifts this week: rebar production fell for two consecutive weeks, mill inventories shifted from growth to decline, and social inventories halted a three-week rising streak. Apparent demand rebounded month-on-month, signaling a marginal improvement in the supply-demand balance.

From a fundamental perspective, expectations for blast furnace maintenance at steel mills are mounting, reinforcing the logic of proactive supply contraction. Coupled with solid cost support from raw materials like iron ore, the room for steel prices to fall further has narrowed significantly. However, the high temperatures of the "Sanfu" period are constraining outdoor construction activity; end-user demand remains at a seasonal low, and speculative demand is cautious, which limits the potential for a rebound.

Overall, the steel market is likely to continue its trend of fluctuating while bottoming out and maintaining relative stability today.

Macroeconomic Highlights

1 Solid Support for Achieving Key Annual Targets

In the first half of 2026, China's GDP grew by 4.7% year-on-year, with the economy operating steadily overall. The CPI rose by 1.0%, the PPI by 1.5%, and the surveyed urban unemployment rate stood at 5.2%. Value-added output in high-tech manufacturing grew by 13.3%, and new growth drivers contributed over 40% to economic growth. Although the growth rate slowed in the second quarter due to short-term factors, the economic fundamentals remain unchanged. The IMF has raised its full-year growth forecast for China. In the second half of the year, macroeconomic policies will remain consistent, focusing on expanding domestic demand and cultivating new growth drivers, providing solid support for achieving key annual targets. 2 Financial support for the real economy yielded significant results in the first half of the year

"Financial data from the first half of the year indicate that monetary policy has effectively supported the real economy," stated Zou Lan, Deputy Governor of the People's Bank of China. The continued implementation of a moderately accommodative monetary policy and the accelerated rollout of financial measures have created a favorable monetary and financial environment for steady economic growth and high-quality development.

3 Intensifying counter-cyclical and cross-cyclical adjustments

The central bank recently announced that it will calibrate the intensity, pace, and timing of monetary policy implementation based on domestic and international economic and financial conditions as well as market performance. It will step up counter-cyclical and cross-cyclical adjustments, focusing on expanding domestic demand, optimizing supply, and strengthening the economy's endogenous growth momentum, thereby consolidating and extending the trend of steady economic improvement.

Analysis of spot market products

Construction materials: Prices stable with an upward trend

The construction materials market remained generally stable yesterday. As the industry is currently in the traditional off-season for construction, persistent high temperatures continue to hinder the commencement of outdoor projects; end-user procurement is primarily driven by essential restocking needs, resulting in moderate overall trading volume. However, support from the supply side is becoming increasingly apparent. Rebar production has declined for two consecutive weeks, with more steel mills across various regions initiating voluntary maintenance. Mill inventories have shifted from accumulation to decline, signaling a clear contraction in supply. Coupled with firm raw material costs, this has effectively capped the downside potential for prices. Construction material prices are expected to remain stable with an upward bias today.

Hot-rolled coils: Prices stable with a firming trend

The domestic hot-rolled coil market remained generally stable yesterday, with slight price increases in some key regions and a modest improvement in end-user trading volume compared to the previous day. Market fundamentals continue to exhibit a structural pattern where flat products outperform long products. On the supply side, maintenance schedules have kept production at low-to-moderate levels, and inventories in major markets have declined month-on-month, marginally easing inventory pressure. On the demand side, essential demand from the manufacturing sector remains relatively resilient, bolstered by structural support from exports; consequently, the sector faces less downward pressure than long products. Additionally, firm prices for iron ore and coke—key cost components—provide a floor for hot-rolled coil prices. The market is expected to remain stable with a firming trend today. Scrap Steel Market Remains Generally Stable

Yesterday, the domestic scrap steel market showed overall stability with a slight upward bias. On the supply side, the pace of scrap collection and dismantling slowed due to typhoons in the south and persistent high temperatures in the north; combined with transport restrictions (both water and land), most steel mills saw a marked drop in arrivals, leading to a rise in restocking demand. On the demand side, while the overall operating rate of electric arc furnace (EAF) mills remained low, the cost-effectiveness of scrap steel versus hot metal continued to stand out; meanwhile, integrated steel mills showed a decent willingness to purchase at current price levels, providing a solid floor for scrap prices. The scrap steel market is expected to remain generally stable today.

Iron Ore Market Fluctuates at High Levels

Yesterday, the iron ore market remained stable overall, with port transactions driven primarily by essential restocking needs at steel mills. Supportive supply-side factors are gradually emerging: overseas mine shipments have entered a seasonal decline phase, and with domestic port arrivals continuing to fall, the pressure from previously loose supply conditions has eased slightly. On the demand side, although hot metal output dipped due to maintenance at steel mills, essential daily restocking continues; coupled with cost-side support from rising ocean freight rates, iron ore prices are finding strong support at current levels. The iron ore market is expected to continue fluctuating at high levels today.

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