In the second week of March, the steel market was engaged in a time lag game between the pace of resumption of production and the recovery of demand. When the blast furnace operating rate of steel enterprises in Tangshan rebounded to 82.3% and the weekly output of the five major varieties jumped by 189,300 tons to 8.53 million tons compared with the previous week, the terminal demand was like a new bud in the late spring cold snap. Although the apparent consumption of rebar increased by 128,700 tons compared with the previous week, the average daily transaction volume was only 110,400 tons, still 15% lower than the same period last year. This mismatch between the upward push in supply and the sluggish demand has led to a divergence in steel prices. The market price of rebar in Shanghai has dropped below 3,300 yuan per ton, while hot-rolled steel has risen by 40 yuan to 3,480 yuan per ton against the trend. The profit scissors gap between plates and building materials has quietly widened.

Behind the data lies the survival logic of steel mills. Despite the pressure of imported ore prices rising to $128 per ton, long-process steel mills still chose to increase production of rebar. The weekly output reached 1.9754 million tons, hitting a new high in nearly eight weeks. This was because rebar, which suffered a loss of 29 yuan per ton, was more cost-effective than cold-rolled steel, which suffered a loss of 45 yuan. After the price of scrap steel dropped by 80 yuan per ton, the short-process electric furnace factory reduced its cost to 3,250 yuan per ton. However, due to insufficient demand, it cut production by 7,200 tons, confirming the industry's iron law that for electric furnaces, demand is the key, while for long-process ones, cost is the key. What is more worthy of attention is the inventory. The social inventory was reduced by 195,500 tons, which was only 60% of the same period last year. The inventory of steel mills decreased by 110,400 tons simultaneously, indicating that the willingness of channels to replenish inventory is weak and the actual implementation rate of demand is less than 70%.

The outcome of this game lies in the raw materials. When Vale's shipment volume rebounded to 24 million tons, the iron ore port inventory dropped to 118 million tons, indicating that the steel mills' resumption of production is still depleting the previous inventory. The consecutive three-week decline in scrap steel prices has brought the cost line of short processes and long processes closer to within 80 yuan per ton. This has only occurred four times in history, and each time it was a signal of the resumption of production in electric furnaces. However, the current profit of electric furnace steel is only 15 yuan per ton. Steel mills would rather let their equipment idle than take the risk of increasing production, reflecting their caution about the future market.

The differentiation of capital flow is more intriguing. On March 14th, the steel sector saw a net outflow of 169 million yuan, but Baosteel Co., Ltd. received a net inflow of 101 million yuan, and Valin Steel saw capital inflows for three consecutive days. This phenomenon of the top stabilizing and the bottom under pressure confirms the judgment of industry analysts. When the profit per ton of steel drops below 50 yuan, the cost advantage of enterprises with long-term iron ore contracts and scrap steel base layouts will be magnified to over 120 yuan per ton. Data shows that the processing cost per ton of steel at Baosteel's Zhanjiang base is 180 yuan lower than the industry average. This is precisely the core logic behind funds voting with their feet.

Standing at the mid-March point, the market is pricing two expectations. One is the implementation pace of the crude steel production control policy. If production is reduced by 5% in the second quarter, the current weekly output of 8.53 million tons will drop to 8.1 million tons, corresponding to a supply and demand gap of 200,000 tons per week for rebar. The second is the intensity of the real estate completion cycle. In January-February, the completed floor area of houses increased by 18% year-on-year, but the steel consumption for steel structures only rose by 3%, indicating a time lag in the transmission of the industrial chain. This temperature difference between policy and reality has trapped steel prices in the middle of the policy bottom and the demand bottom. The price of rebar at 3,300 yuan per ton is close to the lowest point in 2024, with a downward space of 100 yuan, but an upward space awaits a 20% or more improvement in demand compared to the previous period.

It is worth noting that the inventory structure is changing quietly. The inventory of rebar in Hangzhou has been declining for four consecutive weeks, while the inventory reduction in Wuhan and Chongqing has stagnated, reflecting the differentiation of regional demand. The pace of real estate projects ensuring the delivery of completed buildings in the Yangtze River Delta is accelerating, while the arrival of infrastructure funds in the central and western regions is relatively slow. This differentiation has given rise to new trade strategies. Steel traders in East China have begun to stockpile hot-rolled coil plates, betting on the restocking of automobiles and home appliances, while merchants in the central and western regions have chosen to buy and sell quickly to avoid inventory risks.