In April, the prices of the black commodities generally showed a pattern of "first falling then rising". In the first half of the month, signals of easing tensions between the United States and Iran were released, and the price premium pushed up earlier due to geopolitical risks faced correction. Brent crude oil dropped from $110 to $92. Coupled with the approaching peak demand in the peak season, the supply pressure from the rebound in pig iron gradually accumulated, jointly suppressing steel prices. In the middle and late months, the geopolitical conflict game repeated itself, and in addition to its disturbance to energy and supply chains (such as the problem of diesel supply in Australia), the cost support was strengthened again. At the same time, the actual demand for steel showed strong resilience. The weekly data from Mysteel showed that the inventory reduction speed of the five major steel products continued to accelerate. The market's expectation of a rapid decline in demand was revised. Coupled with the temporary supply gap in the Middle East and the widening internal and external price differences, the export of hot-rolled coils and steel billets significantly increased, leading to a bottoming out and rebound of the prices of the black commodities. 

Looking ahead to May, it is expected that the steel prices will generally follow a "high at the beginning and low at the end" trend. In the short term, the United States and Iran have significant differences in issues such as uranium enrichment and the management of the Strait of Hormuz. It is unlikely that a final ceasefire agreement can be reached in the short term. Geopolitical news remains volatile, and the cost support brought by high oil prices has not yet subsided. At the same time, after the May Day holiday, there will be a phased replenishment demand from the downstream sector. The seasonal inertia of the construction sector will also bring a pulse-like demand release. The inventory of the five major steel products is expected to continue a rapid depleting pace, providing a phased support for the steel prices. 

However, as the transition between peak and off-peak seasons progresses, the trend of demand peaking and then declining is inevitable. The demand for building materials is expected to accelerate its decline around the end of May when the rainy season arrives. Although the infrastructure sector has some support from ongoing projects, the connection of new projects is not smooth, and the new housing construction starts continue to shrink. There will be no significant recovery in the short term. At the same time, the constraints on the funding side have further intensified. After the rapid advance issuance of special bonds at the beginning of the year to ensure a "good start", the current issuance has entered a significantly slower stage: as of April 26th, the new special bond issuance in April only completed 37% of the planned amount for the month, and the progress within the month has slowed down for four consecutive weeks; at the same time, the cumulative year-on-year growth rate of special bonds used for project construction has narrowed to 4.4% for five consecutive weeks. The issuance rhythm in April and May may significantly decline compared to the first quarter, and the support of infrastructure funds for demand will continue to weaken. 

The supply side is also facing a marginal peak, but there is insufficient motivation for production cuts. Currently, the profit ratio of steel mills has continued to rise to 50%. In the short term, the willingness for large-scale concentrated production cuts is limited. It is expected that the average daily iron water output in May will stabilize at around 2.41 million tons. Under the pressure of production volume, the speed of deshoring for rebar is expected to decrease from 13% in April to 6% in May, and the speed of deshoring for hot rolled coils will decrease from 8% to 4%. The supply pressure will gradually be transmitted to the price end. 

The raw material market is also unable to sustain its support. There is no tightening basis at the supply and demand level. Although the high iron ore prices have provided some support for raw material demand, as the impact of the Brazilian rainy season fades and liquidity issues ease, the rate of iron ore port inventory reduction will gradually slow down. In terms of coking coal, after the delivery of the 2605 contract is completed, the increase in market resources will also put pressure on prices. At the same time, as the US-Iran conflict enters its third month, the internal pressure on the Trump administration will gradually increase: the time limit for the president to send troops for combat without congressional authorization is 60 days, and it can be extended for up to 30 days for withdrawal. Coupled with the high inflation environment, it is not conducive to the mid-term elections, the expectation of a ceasefire may gradually rise, and the supporting role of energy cost premiums will weaken accordingly. 

Overall, in May, the black market will be under the triple pressure of "weakening cost support, marginal weakening demand, and maintaining high supply", with limited upward price potential. The overall trend is more likely to be a rise followed by a fluctuating decline. Considering the frequent geopolitical and macroeconomic disturbances, steel prices are expected to show a wide range of fluctuations within a certain interval: It is predicted that the spot price of Shanghai rebar will be within the range of 3200-3300 yuan/ton, and the spot price of Shanghai hot rolled steel will be within the range of 3330-3400 yuan/ton. Pay close attention to the arbitrage opportunities brought by changes in the delivery month structure: As the May delivery progresses, the long positions in coking coal gradually shift to the 09 contract, and there is a positive arbitrage space in the 9-1 spread, which may converge to the range of -160 to -180 in the short term; however, in the latter part of the month, as the market gradually trades the logic of the off-season, the near-month contracts are under pressure, and the spread may widen again to above -200, and structural opportunities still exist. 

Thread: In April, the price of thread showed a trend of "first falling then rising". In the first half of the month, signals of easing of the US-Iraq conflict emerged, and the energy premium reversed, with the decline in raw material prices leading to a slight downward movement in steel prices. After the middle and lower half of the month, the geopolitical conflict resumed repeatedly, and the cost support was re-empowered. At the same time, in the context of the peak season, the demand for thread showed certain resilience, coupled with the rebound of futures, some speculative demand was released, and the overall inventory de-accumulation speed continued to accelerate. The market sentiment was significantly restored, and the steel price rebounded from the low level. The spot price of Shanghai thread rose from 3,210 yuan/ton to 3,260 yuan/ton. The monthly average price increased by 5 yuan/ton compared to March to 3,228 yuan/ton. Overall, it presented a running pattern of "cost support and demand recovery". 

Entering May, the demand side is expected to show a pattern of "stable in the beginning and weak later". In the middle and early part of the month, with the concentrated replenishment of projects after the holiday and the seasonal inertia of the construction sector providing support, the demand still maintains certain resilience; however, as the southern rainy season gradually unfolds, the slowdown in construction pace will significantly drag down the terminal demand. Although the infrastructure sector has the support of ongoing projects to complete the backlog, the connection of new projects is not smooth, and the new housing construction starts continue to shrink, making it difficult to have a significant recovery in the short term. It is expected that the actual demand for steel bars at the end of the month will fall to 2.27 million tons, and the monthly average will drop to 2.29 million tons, with a环比 decrease of 3.4%. 

Constraints on the funding side have been strengthened simultaneously. After the special bonds were issued in advance at the beginning of the year to ensure a "good start", the recent issuance pace has significantly slowed down: As of April 26, the scale of new special bonds issued in April only completed 37% of the planned amount for the month, and the progress has continued to be slow; the cumulative year-on-year growth rate of special bonds used for project construction has narrowed to 4.4%. Additionally, according to the monthly issuance plans of various regions, the issuance pace in April and May has significantly slowed down compared to the first quarter, and the supporting role of infrastructure funds for demand has marginally weakened. At the same time, real estate investment and the availability of funds have continued to face pressure, and the year-on-year decline in the first quarter has further expanded, and the drag on real estate steel usage has deepened. 

The supply side is expected to remain relatively stable. The monthly average output of small samples of steel bars in May is projected to be around 21.3 million tons, which is roughly the same as that in April. Although the peak in demand has imposed certain constraints on steel mills' production increase, the current profit levels of steel mills remain within a reasonable range. According to the Mysteel model, the profit per ton of hot blast steel in blast furnaces is approximately 95 yuan, and the profit per ton of electric arc furnace for off-peak electricity is approximately 60 yuan, both higher than those in the same period last year. Especially, the profit improvement in the electric arc furnace sector is significant. At the same time, the inventory reduction process of steel mills is still relatively smooth. The weekly inventory reduction slope of the long process has continuously increased to 6.4%, indicating that the liquidity pressure is not high, and the production enthusiasm remains. However, the regional structure differentiation is still quite obvious. The absolute value of social inventory in East China increased by nearly 900,000 tons in the fourth quarter, and the inventory reduction pressure is relatively large. Traders mainly sell at discounted prices, have a weak intention to stockpile, and the inventory pressure is showing a trend of being transmitted to the steel mill side. Under the dual influence of profit support and high inventory constraints, the pace of steel mills' resumption and increase in production may tend to be cautious. 

Overall, the May steel bar market will be in a re-balancing stage where demand is gradually weakening, supply remains high, and inventory reduction slows down. In the first half of May, driven by replenishment of inventory, it is expected that the weekly inventory reduction scale will still remain at around 200,000 tons. However, in the second half of May, as demand rapidly declines, the inventory reduction pace will gradually slow down. According to the balance sheet calculation, the weekly average inventory reduction slope in May is approximately 2.2%, still at the slowest level in the past four years compared to the same period. The inventory-to-sales ratio remains higher than the year-on-year level, and the supply and demand pressure is gradually transmitted to the price end. The price movement rhythm may present a pattern of "higher in the beginning and lower later". 

Hot rolled steel: In April, due to the escalation of regional conflicts in the Middle East, market concerns over energy supply pushed up costs, and the price of hot rolled steel continued to reach new annual highs. The price trend remained upward: The average spot price of hot rolled steel in Shanghai in that month was 3,309 yuan per ton, up 41 yuan per ton compared with the previous month. 

Looking ahead to May, the hot-rolled steel market may enter a period of supply-demand imbalance. The market will gradually verify the high demand during the peak season. It is expected that in May, the hot-rolled steel market may gradually enter the off-season, and the rate of inventory reduction will marginally slow down. Based on the balance sheet analysis, it is predicted that by the end of May, the total inventory of hot-rolled steel in the small sample will be reduced by approximately 146,000 tons, and the rate of inventory reduction will slow down to 3.5%. Specifically, this is reflected in the following two aspects: 

Supply fluctuates at a low level due to steel mills' maintenance and the supply gap. 

The average weekly output of hot-rolled coils in April was 3.04 million tons, an increase of 35,000 tons compared with the previous week. The main reasons were the rapid recovery of steel mills' production profits and the weakening of environmental restrictions. According to the research by Mysteel, by the end of April, the per-ton production profit of hot-rolled coil steel mills in Hebei Province had recovered to approximately 120 yuan. However, with the supply gap emerging in the southern region and the maintenance shutdown of some blast furnaces in the northern region, it is expected that the average weekly output of hot-rolled coils in May may drop to 3.03 million tons, a decrease of 14,000 tons compared with the previous week. 

2. Demand or maintain a certain degree of resilience 

The average apparent weekly demand for hot rolled coils in April was 313.5 million tons. During the same period, the inventory reduction rate was 8.3%. The manufacturing enterprises' demand for hot rolled coils remained stable in May, and the export price gap remained at a high level throughout the year, both of which supported the resilience of hot rolled coil demand. Therefore, it is expected that the apparent weekly demand for hot rolled coils in May will drop to 306 million tons, and the inventory reduction rate will slow down to 3.5%. 

Overall, the supply and demand of hot-rolled steel in May may slightly decline, and the rate of inventory reduction will slow down. However, the accumulation of contradictions is limited. Coupled with the support from market confidence, it is expected that the price trend will enter a state of high-level oscillation. 

Iron Ore: In April, the average price of PB powder at Qingdao Port was 771 yuan per ton, down by 10 yuan compared to March. Meanwhile, the index of 62% Australian ore powder on Mysteel was 108.66 US dollars per ton, up by 0.76 US dollars compared to March. The trend of iron ore prices was mainly influenced by the opening and closure of the Hormuz Strait, showing a pattern of first falling and then rising. During this period, the agreement reached in BHP negotiations and the slower-than-expected resumption of production at steel mills led to greater pressure on the spot price compared to the US dollar price. 

Looking ahead to May, the price of iron ore still faces the risk of a decline in crude oil prices. At the same time, the output of pig iron in steel mills has peaked. After the end of the rainy seasons in Australia and Brazil, shipments have gradually increased, and the fundamentals of iron ore have gradually tilted towards a situation of supply exceeding demand. Therefore, the downward pressure on the price is relatively large. However, for the smooth decline in the iron ore price, it is still necessary to see the substantive easing of the negotiations between the United States and Iran, as well as clear signs of a significant weakening in domestic demand for steel and steel exports. Otherwise, the decline in the iron ore price will not be smooth. It is expected that the price of PB powder at Qingdao Port will remain within the range of 750-800 yuan. 

The US dollar index is more susceptible to the influence of oil prices and exchange rates. It is expected that the trend in May will be opposite to that in April. The spot price is likely to be stronger than the US dollar index price. Moreover, the spot price is more likely to face downward pressure in the middle and late of May. Firstly, the situation between the US and Iran becomes clearer the later it is, and the price is more likely to return to normal. Secondly, when domestic demand peaks and enters the off-season, the market's bearish sentiment is also stronger. Therefore, it is expected that the mineral price in May will show a trend of being higher at the beginning and lower at the end. 

Bifocal: The spot and futures prices of bifocal coal in April showed a trend of first falling and then rising. At the beginning of the month, due to the weakening expectations of the geopolitical conflict between the United States and Iran, the bifocal futures followed the decline of crude oil prices and basically reversed the gains made since March. The May contract of coking coal once reached a new low. Subsequently, factors such as the continuous recovery of iron water production, the price of coking coal approaching the lowest warehouse cost, the continued negotiations between the United States and Iran, and the active liquidation of speculative short positions by the speculators led to an emotional and valuation recovery in the market, causing the prices to start rebounding. As of now, in April, the prices of coking coal have been raised twice at the spot level. The average price of port semi-cooked wet coking coal is 1,484 yuan per ton, up by 5 yuan per ton compared with the previous period; the average price of low-sulfur main coking coal in Linfen is 1,518 yuan per ton, up by 18 yuan per ton compared with the previous period. 

Looking ahead to May, apart from macro factors, the factors that have a greater impact on the spot and futures prices of coal include the marginal changes in the supply of imported coal, as well as the changes in the profits of steel mills: 

Currently, the supply and demand of carbon elements in the domestic market have reached seasonal peaks. The operation of coking coal mines, blast furnaces, and coking enterprises has reached the highest levels of previous years. There is a low probability of further increase in production. Therefore, the price elasticity lies in the changes in imported supply. Among them, the increase in Mongolian coal in the first quarter was the most significant. The cumulative customs clearance volume at the Gan'ermaodu Port in the first quarter increased by 5 million tons compared with the same period last year, basically reaching the annual target. At the same time, the price difference between Mongolian coal and domestic coal is at a low level, and there may be a certain expectation of reduction in the future. 

In addition, the coking coal market currently has plans for a third round of price increase. It is expected that the market will propose a third round of price increase in the short term, and it is expected to be implemented around the May Day holiday. However, based on the futures price of the 09 contract being above 1800, after the two rounds of price increase, the coking coal inventory is currently around 1755-1790. The market's expectation for future price increases is limited. At the same time, the profit of coking coal relative to that of steel mills has been significantly restored recently. We are observing the sustainability of iron water prices, and there may still be room for price reduction in the later part of May. 

In addition, it is also necessary to pay attention to the fact that after the delivery of the 05 contract, the increase in resources in the coking coal market will have a downward pressure on the price. 

Overall, it is expected that the spot prices of the two types of double-focus lenses in May will show a trend of being higher in the beginning and lower in the end. The overall average price will fluctuate slightly compared to April.