The domestic steel market continued to experience a downward trend last week, with prices falling further and the decline intensifying. While some areas in northern China saw slight price increases due to better trading activity, most steel products across the country faced broad-based declines. With weakening demand, ongoing drops in raw material prices, and mounting financial pressures, both forward and spot prices have hit their lowest levels since 2013, with no clear signs of stabilization. Market sentiment has turned increasingly pessimistic, as traders are actively cutting prices to move inventory, leading to a wave of aggressive price reductions.
In Shanghai, construction steel prices dropped by RMB 100 per ton within the week, with mainstream prices for third-grade rebar in Xicheng and Rizhao ranging between RMB 3,330–3,350 per ton. Hot-rolled coil prices fell by RMB 90 per ton, with popular brands like Rizhao and Shagang quoting at RMB 3,450–3,480 per ton. Cold-rolled coil prices also declined by RMB 80 per ton, with Wuhan Iron and Steel and Benxi offering prices between RMB 4,480–4,500 per ton.
The author attributes the continued price decline to several key factors. First, weak demand from key sectors such as real estate, automobiles, and construction machinery has remained a major driver of the downward trend. Recent economic data suggests that the domestic economy is unlikely to recover quickly, which will further limit steel demand. According to HSBC's May manufacturing PMI, the index fell to 49.6, below the 50 threshold for the first time in seven months, signaling continued contraction. The manufacturing output index also declined slightly, reinforcing concerns about weak domestic and external demand.
Second, raw material prices have continued to fall, putting even more pressure on steel producers. Iron ore prices in Tangshan dropped by 20 yuan per ton, while Qingdao and Beilun ports also saw declines. The ex-factory price of carbon billet in Tangshan fell to RMB 3,060 per ton, and 20MnSi billet prices dropped to RMB 3,180 per ton. This decline in input costs has weakened the cost support for steel prices, and without a significant improvement in downstream demand, the market remains bearish.
Third, there has been little progress in reducing steel production. Although many steel mills have announced maintenance plans, overall crude steel output has actually increased. According to data from the China Iron and Steel Association, daily crude steel production rose by 2.71% in May, reaching record highs. This indicates that production cuts have not been substantial enough to ease market pressure, and the high output continues to weigh on prices.
Fourth, financial pressures remain severe. Prolonged price declines have led to widespread losses across the industry, with tight capital chains and some traders nearing insolvency. Maintaining low inventory levels has become the norm, reducing the role of traders as market stabilizers. As the month ends, traders are forced to cut prices further to secure cash flow and prepare for the next month’s orders.
Overall, with weak demand, rising inventories, and continued declines in raw materials, the steel market is under strong downward pressure. The outlook remains bleak, and further price reductions are likely in the near term.
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