During the critical period from late February to early March, the dynamics of the domestic steel market have received much attention, presenting a complex situation where seasonal recovery in consumption and expectations of supply adjustment are intertwined. Although steel prices are still in a weak range at present, the rebound in apparent consumption, the differentiation of inventory structures, and the gradual warming of expectations for crude steel production reduction policies have all brought new focal points to the entire market. This also makes market participants full of anticipation and contemplation about the future market trends.

I. Consumption Side: Significant Manifestation of Seasonal Recovery Signals

The latest data shows that the apparent consumption of rebar increased significantly by 220,900 tons month-on-month, reaching 1.9071 million tons. This growth trend is very obvious, fully reflecting the gradual release of market demand. Moreover, the daily average transaction value of construction steel increased by 1.6% month-on-month, which also confirms the improvement in market activity from the side. This data trend echoes the February Steel Purchasing Managers' Index (PMI) data released by Xinhua Finance, strongly indicating that terminal demand is gradually recovering and the market is gradually emerging from the downturn.

From a regional perspective, due to the constraints of weather conditions, the resumption of work in northern regions has been relatively lagging, and the progress of engineering construction activities has been affected to some extent. However, the eastern and southern regions of China have shown a favorable situation of a month-on-month double increase in the demand for building materials and steel plates. These regions, with their relatively suitable climatic conditions and proactive market policies, have attracted a large number of engineering projects to start construction, thus driving strong demand for steel. For example, some large-scale infrastructure construction projects and real estate development projects in the eastern region have resumed work one after another, resulting in a sharp increase in the demand for construction steels such as rebar and wire rod. The southern market, benefiting from the prosperous development of the manufacturing industry, has seen a continuous rise in the demand for various types of steel plates, injecting strong vitality into the steel market.

The changes in the inventory structure have further strongly confirmed the process of demand recovery. As of February 28th, the social inventory of the five major steel products increased by 278,800 tons month-on-month, of which the increment of rebar social inventory contributed more than 75%. This indicates that against the backdrop of the gradual warming of market demand, traders and downstream enterprises have begun to increase their inventory to meet future production and sales needs. In contrast, the inventory of steel mills decreased by 128,200 tons, and the decline in rebar inventory in steel mills was particularly significant. This differentiation clearly shows that steel mills are alleviating inventory pressure by accelerating shipments to cope with changes in market demand. At the same time, the acceleration of downstream procurement rhythm also reflects the gradual restoration of market confidence, and enterprises have a more optimistic outlook for the future market.

It is worth noting that the policy front also provides potential and powerful support for demand. According to relevant information, in March, infrastructure investment demand enters a concentrated construction start-up period. Local governments have increased their investment in infrastructure construction one after another, and a large number of road, bridge, railway and other engineering projects have broken ground, resulting in a huge demand for steel. The arrival of the traditional peak season in the manufacturing industry also makes it possible for the consumption of steel plates by various industrial enterprises to further warm up. Although the current steel demand in the real estate market is still weak, the policy expectations of the "Two Sessions" may significantly boost market sentiment. The government may introduce a series of policies conducive to the stable development of the real estate market, thereby driving the rebound of real estate investment and further increasing the demand for steel.

II. Supply Side: Intense Game between Output Growth and Reduction Expectations

Currently, the supply side presents a complex pattern where output growth and policy constraints coexist. The weekly output of the five major steel products increased by 62,500 tons month-on-month to 8.42 million tons, of which the output of construction steel increased by 81,400 tons, indicating the vitality of market production. From the perspective of the production process, the output of rebar in the long and short processes increased by 52,600 tons and 43,300 tons respectively month-on-month, and the utilization rate of electric furnace production capacity has returned to the normal level. This is mainly due to the recovery of market demand, which gives steel mills the motivation to increase production in order to obtain more profits.

At the same time, the expectations of crude steel production reduction policies have obviously disturbed market sentiment. The production index of the steel industry's PMI in February increased by 3.1 percentage points month-on-month to 45.6%, and the production of steel mills has stabilized. However, inventory pressure may limit the subsequent room for output growth. If the production reduction policy is implemented, it will have a significant impact on the market supply and demand structure, promoting the optimization of the supply and demand structure and making the market more balanced. The government may achieve the reduction of crude steel production by restricting production capacity, raising environmental protection standards, etc., thereby reducing market supply and alleviating the contradiction between supply and demand.

In terms of raw material costs, the decline in import ore prices combined with the stability of scrap steel prices has expanded the profit margin of long-process steel mills. The gross profits of rebar, hot-rolled steel, and cold-rolled steel increased by 30 yuan/ton, 25 yuan/ton, and 55 yuan/ton respectively month-on-month. This gives long-process steel mills a greater advantage in market competition and enables them to better cope with market challenges. However, the profit of short-process electric furnace steel has shrunk due to the decline in finished product prices, indicating that the differentiation of production costs has intensified, and the subsequent supply elasticity may depend on the profit transmission effect. Short-process electric furnace steel is highly sensitive to the prices of finished products. In the case of a decline in finished product prices, its profit margin is severely squeezed, which may lead some electric furnace steel enterprises to reduce production, thus affecting the market supply structure.

summary

In the short term, the steel market is in a critical window period of seasonal demand recovery and supply adjustment expectations. The moderate recovery on the consumption side and the warming of policy expectations may support the stabilization of steel prices, but inventory pressure and cost fluctuations still need to be closely monitored. The operation of the industry may continue to exhibit the characteristics of "weak reality, strong expectations", and the market is eagerly awaiting the implementation of the policies of the "Two Sessions" and the details of production control rules to clarify the future market trends. In this period full of uncertainties, market participants need to pay close attention to market dynamics and adjust their business strategies in a timely manner to deal with the challenges and opportunities brought about by market changes.