Ferrous metals morning briefing: Reduced cost support leads to narrow range-bound movement for steel futures.
Market Information:
1. 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; value-added of industrial enterprises above designated size increased by 5.4%.
2. Fixed asset investment fell by 5.7%, while total retail sales of consumer goods grew by 1.3%.
3. National Bureau of Statistics data shows that in June 2026, China's crude steel output was 83.67 million tonnes, up 0.4% year-on-year. For the January-June period, cumulative output was 499.95 million tonnes, down 3.0% year-on-year.
4. Customs data indicates that in June 2026, China exported 10.32 million tonnes of steel products, a decrease of 21,000 tonnes or 0.2% from the previous month. Cumulative steel product exports for January-June were 54.874 million tonnes, down 5.6% year-on-year.
5. On July 21, Shagang issued its ex-factory prices for late July, reducing prices for rebar, wire rod, and coiled rebar by 100 yuan per tonne. Jiangsu Yonggang's prices for the same products remained stable for late July.
6. On July 20, steel mills in Hebei, Tianjin, and other regions implemented the first round of price cuts for coke procurement, with wet-quenched coke reduced by 50 yuan/tonne and dry-quenched coke by 55 yuan/tonne, effective from midnight on July 22, 2026.
7. On July 21, iron ore transactions at major ports nationwide totaled 786,000 tonnes, up 38.1% from the previous day. Transactions of construction steel products among 237 mainstream traders were 97,100 tonnes, up 23.9% day-on-day.
8. Last week, the blast furnace capacity utilization rate at 247 steel mills was 89.78%, down 0.77 percentage points week-on-week. The mill profitability rate was 37.23%, down 3.03 percentage points week-on-week. Average daily hot metal output was 2.3921 million tonnes, down 20,600 tonnes week-on-week.
9. Last week, the supply of the five major steel products was 8.2582 million tonnes, down 212,100 tonnes or 2.5% week-on-week. Total inventory was 16.1606 million tonnes, down 178,600 tonnes or 1.1% week-on-week. Apparent consumption was 8.4368 million tonnes, up 0.9% week-on-week.
Rebar: Last week, rebar production continued to decline, with cumulative output down 83,200 tonnes to 1.9684 million tonnes. Total inventory fell by 76,000 tonnes to 6.9248 million tonnes. Apparent demand recovered by 94,700 tonnes week-on-week to 2.0444 million tonnes. The drawdown in both mill and social inventories indicates an overall improvement in circulation across the rebar supply chain. Intensified losses for finished steel products elevate the risk of blast furnace maintenance and production cuts, limiting the upside for raw material prices. In the short term, a range-bound trading approach is recommended for the steel market.
Hot-Rolled Coil: Last week, hot-rolled coil production decreased by 65,400 tonnes to 2.9748 million tonnes. Total inventory fell by 45,400 tonnes to 4.3577 million tonnes. Apparent demand decreased slightly by 3,700 tonnes week-on-week to 3.0202 million tonnes. Currently, production cash flow for some mills is already being eroded. In the short term, the scale of steel mill production cuts is expected to continue expanding, and production is forecast to have further downside potential. Intensified losses for finished steel elevate the risk of subsequent blast furnace maintenance and cuts, capping the upside for raw materials. In the near term, a range-bound trading strategy is still advised for the steel market.
Trading Strategy: For rebar 2610, consider a range of 3050-3150; for hot-rolled coil 2610, consider a range of 3270-3370.
Ferroalloys: Remaining Under Pressure
View: Neutral. Futures and spot prices continue to face pressure. Although there was some support from positive news on coking coal, the K-line price closed in negative territory. With weakening production intensity at downstream steel mills, ferroalloy demand faces significant negative feedback pressure, making sustained price improvements difficult. Silicon iron output remains high, and factory inventory pressure is substantial. After silicon iron costs increased, profitability has deteriorated, though the loss pressure is not yet severe enough to trigger sustained production cuts. Silicon manganese production has decreased significantly, but factory inventories have hit a record high. Alleviating this pressure would require maintaining low production for a longer period. The previous rise in futures and spot prices is not conducive to clearing supply-side pressure.
View: Adopt a range-bound trading approach for alloy prices. For silicon iron 09 contracts, consider a range of 5500-5950 yuan/tonne; for silicon manganese 09 contracts, consider 5600-5950 yuan/tonne. Regarding strategy, continue holding out-of-the-money call options on the 09 contract.
Comments