Steel markets exhibited a stable pattern of "divergence between futures and spot prices with strong cost support" yesterday. Prices for ferrous futures were mixed, with rebar down 0.32%, hot-rolled coil down 0.33%, iron ore down 0.46%, while coke rose 2.31% and coking coal gained 0.37%. Spot market performance was relatively firm, with rebar spot prices stable to slightly higher, and hot-rolled coil prices largely flat. Trading activity showed improvement compared to the previous day, with transaction volumes for mainstream traders' construction steel increasing sequentially, particularly for lower-priced resources, indicating a notable rise in market activity.
Specifically, support from the cost side continues to strengthen. The sixth round of coke price hikes has been fully implemented, and a seventh round is actively being prepared. Coking plants are generally operating with low inventories and smooth shipments, while steel mills show a clear willingness to support prices. Although seasonal factors such as construction halts in some areas during the national college and high school entrance exam periods and the rainy season in southern China will still constrain end-user demand to some extent, the robust support from costs has effectively capped the downside for steel prices. This is coupled with a gradual recovery in recent transactions and ongoing improvement in market sentiment.
Furthermore, on a macro level, expectations for domestic infrastructure and policies aimed at stabilizing domestic demand provide a floor. Additionally, escalating tensions in the Middle East and a sharp rise in oil prices are pushing up costs for bulk commodities overall, indirectly supporting steel prices.
Therefore, considering all factors, it is anticipated that domestic steel prices today will continue to exhibit a narrow, volatile but firm trend. Mainstream products such as rebar and hot-rolled coil may see small increases of 10-20 yuan per ton.
Key Macro Developments
Maximizing the Integrated Effect of Existing and New Policies
The National Development and Reform Commission emphasized leveraging macro policies to the fullest and maximizing the integrated effect of existing and new policies. It stressed strengthening the planning and construction of key infrastructure networks, closely combining investment in physical assets with investment in human capital, and effectively implementing policies for consumer goods trade-ins. The commission also highlighted accelerating the development of a modern industrial system, comprehensively implementing the "Artificial Intelligence Plus" initiative, continuously strengthening reform and innovation, deepening efforts to build a nationally unified market, and intensifying efforts to curb "involution-style" competition.
CPI Remains Generally Stable in May, PPI Continues to Rise
In May, the consumer market operated with overall stability. The Consumer Price Index (CPI) decreased by 0.1% month-on-month but increased by 1.2% year-on-year. The core CPI, which excludes food and energy prices, rose by 1.1% year-on-year. Influenced by increased demand in some domestic sectors and the transmission of international commodity price fluctuations, the Producer Price Index (PPI) increased by 0.5% month-on-month and 3.9% year-on-year.
China's Automobile Exports Surge 68.7% Year-on-Year in May
Latest data shows that China's automobile exports reached 930,000 units in May, a year-on-year increase of 68.7%, marking the second consecutive month that exports have remained above 900,000 units. Notably, new energy vehicle exports showed particularly high growth, reaching 446,000 units, more than doubling compared to the same period last year. A representative from the China Association of Automobile Manufacturers stated that China possesses the world's most complete new energy vehicle industry chain, from lithium processing and battery manufacturing to motors, electronic controls, and vehicle assembly, with ample capacity, controllable costs, and a supply chain with strong risk resilience.
Spot Market Analysis by Product
Construction Steel
Steady with a Firm Bias
Construction steel prices were stable to slightly higher yesterday. Construction sites that had halted work due to exam-related controls have gradually resumed normal operations, leading to a steady release of end-user demand and an improvement in market trading activity. Furthermore, a new round of coke price hikes has officially taken effect, continuously strengthening cost-side support and effectively capping the downside for steel prices. Coupled with macro-level expectations for domestic infrastructure and policies to stabilize domestic demand providing a floor, the construction steel market is expected to operate with a steady to firm bias today.
Hot-Rolled Coil
Steady with Adjustments
Domestic hot-rolled coil prices were mostly stable yesterday. Traders generally focused on selling at stable prices to recoup funds. Although overall market transactions were moderate, there was marginal improvement compared to the previous day, with decent sales of lower-priced resources. Demand remains sluggish in the traditional off-season of June. However, considering that coke price hikes on the cost side have provided a relatively solid bottom support for prices, and given that the overall hot-rolled coil inventory structure remains healthy without significant accumulation pressure, the hot-rolled coil market is expected to operate steadily with adjustments today.
Scrap Steel
Predominantly Stable
Domestic scrap steel prices were largely stable yesterday. High temperatures and rainy weather across many regions have increased the difficulty of outdoor collection operations. Additionally, the implementation of the "reverse invoicing" policy has led to an overall tight supply of high-quality, tradable scrap steel. Steel mill inventory turnover days remain at low levels, providing some support for scrap prices. However, considering the impact of entering the seasonal off-season, integrated steel mills continue to follow a strategy of purchasing based on demand and replenishing as needed, while electric arc furnace mills show moderate production enthusiasm. Therefore, the scrap steel market is expected to continue its predominantly stable trend today.
Iron Ore
Volatile at High Levels
Iron ore prices consolidated with reduced volatility yesterday. Although major Australian and Brazilian miners are entering their fiscal year-end volume push phase in June, maintaining expectations for marginally looser overall supply, short-term shipments from Brazil have seen a periodic decline. Furthermore, despite a slight pullback, ocean freight rates remain in the high range of the past five years, providing strong bottom cost support for ore prices. Demand-side resilience persists, with the national average daily hot metal output maintaining above 2.4 million tons, and steady procurement for essential end-user needs. The iron ore market is expected to continue trading with volatility at high levels today.
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