Steel Morning Report: Cost Support Weakens, Steel Futures in Narrow Range
Market Information:
1. U.S. President Donald Trump stated he is seriously considering restarting major military operations in Iran, with a scale exceeding the previous "Epic Fury" operation, emphasizing that the U.S. military is fully prepared.
2. According to data from the National Bureau of Statistics, China's GDP grew by 4.7% year-on-year in the first half of 2026; industrial value added above designated size increased by 5.4%; fixed asset investment fell by 5.7%; and total retail sales of consumer goods grew by 1.3%.
3. Ministry of Industry and Information Technology data shows that in the first half of this year, China's three core shipbuilding indicators—completion, new orders, and orders on hand—all reached new historical highs. Orders on hand were 363.25 million deadweight tons, up 54.9% year-on-year; new orders were 121.06 million deadweight tons, up 173.1% year-on-year, exceeding the historical peak for full-year orders.
4. China Passenger Car Association: From July 1-19, national passenger car retail sales were 770,000 units, down 16% year-on-year in July and 4% month-on-month. Cumulative retail sales for the year to date were 9.471 million units, down 20% year-on-year.
5. On July 22, coke prices weakened. Major steel mills in Hebei and Shandong regions implemented the first round of price cuts for coke procurement, reducing prices by 50-55 yuan per ton.
6. On July 23, national major port iron ore transactions were 696,000 tons, down 2% month-on-month; 237 mainstream traders' construction steel transactions were 88,400 tons, up 12.2% month-on-month.
7. This week, total supply of five major steel products was 8.3743 million tons, up 116,100 tons week-on-week; total inventory was 16.2941 million tons, up 133,500 tons week-on-week; weekly consumption was 8.2408 million tons, with building materials consumption down 3.8% month-on-month and flat products consumption down 1.6% month-on-month.
Rebar:
This week, rebar production increased by 46,000 tons cumulatively to 2.0144 million tons. Total inventory rose by 52,200 tons to 6.977 million tons. Apparent demand decreased by 82,200 tons week-on-week to 1.9622 million tons. Mill inventories continued to decline slightly, but social inventories began to restock. The increase in production month-on-month may further intensify market supply pressure, which is bearish for rebar futures. However, considering that both long and short process steel mills are currently facing losses, and there are plans for further production cuts and maintenance, the potential for a sustained rise in rebar production in the short term is limited. This also restricts the upside for raw material prices. In the short term, the rebar market is expected to trade in a range-bound pattern.
Hot Rolled Coil:
This week, hot rolled coil production increased by 45,400 tons cumulatively to 3.0202 million tons. Total inventory slightly increased by 27,800 tons to 4.3855 million tons. Apparent demand decreased slightly by 27,800 tons week-on-week to 2.9924 million tons. Some manufacturers are experiencing cash flow erosion, limiting the potential for a sustained increase in production. The risk of blast furnace maintenance and production cuts is rising, limiting the upside for raw materials and weakening cost support. In the short term, the hot rolled coil market is also expected to trade in a range-bound pattern.
Strategy-wise, rebar 2610 contract reference range is 3050-3150; hot rolled coil 2610 contract reference range is 3270-3370.
Ferroalloys: Factory Accumulation Pressure Remains High
Outlook: Neutral
Magnesium metal prices are depressed, with some companies experiencing losses and implementing maintenance shutdowns. Additionally, as downstream steel production intensity weakens, demand pressure on alloys is high. Silicon iron production has decreased slightly, but factory inventories continue to increase. The shift in silicon iron costs has led to poorer profitability, but loss pressure is not yet severe. If prices rise further, it could delay production cuts or even lead to new output. Silicon manganese production has dropped significantly, but factory inventories continue to hit new historical highs. Relieving this pressure will require maintaining low production for an extended period or waiting for an improvement in downstream demand.
Outlook: Alloy prices are expected to trade in a range. Silicon iron 09 contract range: 5500-5950 yuan/ton. Silicon manganese 09 contract range: 5600-5950 yuan/ton. Strategy-wise, hold out-of-the-money call sell options for the 09 contract.
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