In April, the black series market was under overall pressure, with the price center slightly dropping month-on-month, confirming our core judgment in the monthly report that "supply is strong and demand is weak, and prices are difficult to rise". The supply of steel has been continuously increasing. Coupled with the weakening of external demand expectations against the backdrop of trade frictions, market sentiment has become cautious, and the price trend has fallen into a period of continuous bottoming out.

From the perspective of supply and demand data, the average daily molten iron output of 247 sample steel mills rose by 77,000 tons in April compared with the previous month to 2.417 million tons, indicating a significant increase in supply pressure. Meanwhile, the weakening of exports has slowed down the pace of sheet inventory reduction, but the overall inventory reduction is still advancing. The inventory reduction rate of the five major materials has increased by 2.6 percentage points compared to last month to 9.2%, indicating that the support from domestic demand still has certain resilience.

Entering May, the supply and demand of the steel market will show a phased evolution. It is expected that in the first ten days of the month, steel prices will continue to fluctuate and bottom out, supported by domestic demand such as infrastructure investment and manufacturing orders. However, starting from the middle of the month, the seasonal off-season effect will gradually emerge. Terminal demand will weaken and steel mills' profits will be compressed, and the downward pressure on prices will be gradually released. If steel mills fail to follow up on production cuts in a timely manner, the mismatch between supply and demand may intensify the extent of price adjustments.

The key variable of steel prices in late May lies in the production reduction behavior of steel mills against the backdrop of profit compression. As of now, Mysteel predicts that the planned daily output of molten iron from 247 steel mills in May may be 2.4 million tons, with a limited decline. It is difficult to reverse the high supply pattern in the short term, which will form the main tone of the steel price center continuing to decline.

Against this backdrop, it is expected that the overall steel price in May will show a trend of "stabilizing at first and then falling". Although the downward pressure has been released, the decline may be relatively limited. If the domestic market introduces further counter-cyclical regulatory policies in response to external shocks, it is not ruled out that market sentiment will be restored, driving a phased rebound in steel prices.

Demand resilience supports steel prices in the first ten days of May

Since mid-April, the actual demand for steel has demonstrated a strong ability to withstand pressure. Mysteel's weekly data shows that the total inventory reduction speed of the five major materials has significantly accelerated and set a new record for the fastest weekly inventory reduction this year. The market is gradually correcting its previous judgment on the continuous decline in demand.

In the first ten days of May, the demand for steel was supported by the following factors, and the overall toughness may be sustained:

The acceleration of special bonds and the improvement of the fund availability rate have supported the demand in the building materials sector

The issuance pace of special bonds has accelerated: According to Mysteel's statistics, as of the end of April, the issuance progress of normal special bonds (excluding chemical bonds and land reserve bonds) increased by 9 percentage points year-on-year to 41.5%. The improvement of the financial environment is conducive to promoting the implementation of more physical workloads of infrastructure projects.

The rate of project fund availability has significantly rebounded: Data from Centennial Construction shows that the rate of infrastructure project fund availability rose to 60.41% in late April. Once it stabilizes above 60%, most projects can maintain a normal construction pace. Given that the transmission cycle of special bond funds is 2 to 3 months, it is expected that the overall level of funds in place in the second quarter will remain at a relatively high level, thereby supporting the resilience of building materials demand in May.

2. Domestic demand in the manufacturing industry has been steadily released, and the demand for sheet materials remains supported

Policy-driven release of demand from "two new" entities: At the end of April, the Political Bureau of the Central Committee emphasized accelerating the issuance and utilization of "ultra-long-term special Treasury bonds", and the related funds will be used for subsidies to "two new" projects. It is expected that the manufacturing sector such as automobiles will benefit from the implementation of policies in the second quarter, driving the release of orders for sheet materials.

The increase in home appliance production schedules supports cold-rolled demand: Industrial Online's forecast data shows that on May 3rd, the year-on-year growth rate of planned sales of large white goods expanded by 4 percentage points to 10.3%, and the overall planned output increased by 6% year-on-year. Driven by domestic sales, the home appliance industry is experiencing a boom in both production and demand, which is expected to stabilize the demand for boards.

3. The expansion of the export price spread and the increase in steel billet exports have mitigated the risk of a decline in external demand

The expansion of the export price gap strengthens the order-taking capacity: The decline in steel prices in April has driven up the competitiveness of exports. The price gap between Chinese hot-rolled coils and major export markets such as South Korea and Vietnam has widened by 7 US dollars per ton and is currently generally maintained above 50 US dollars per ton. Mysteel's research shows that the export order intake of steel mills in Northeast China and South China improved marginally at the end of April, and it is expected that the resilience of steel exports will continue.

The "rush to export" campaign has been launched before the anti-dumping ruling: The anti-dumping investigation on Chinese hot-rolled coil by South Korea and Vietnam is expected to be implemented in June, and some overseas customers have made advance purchases and stocked up. Some steel mills in South China have export orders of 300,000 tons in hand, with delivery dates concentrated before June, which supports short-term export demand.

The increase in steel billet exports made up for the decline in finished product exports: China's steel billet exports rose by 354% year-on-year in the first quarter, with over 1 million tons exported in March alone. Since April, the order intake has continued to increase. Currently, the price difference with the Turkish market still stands at 300 yuan per ton. It is expected that the steel billet export volume will increase to 1.5 million tons in April and May, providing effective support for the overall export demand.

Overall, although the demand for steel exports has declined compared with the previous period, the overall downward trend is still controllable. According to a survey by Mysteel, the planned export volume of hot-rolled coils from sample enterprises in May was 1.09 million tons, a 5.8% decline from the previous month and a slight increase compared to April (a 3.3% drop). However, under the combined effect of multiple factors, there is still room for expansion in the resilience of steel exports.

Second, the profits of steel mills continue to be under pressure, curbing the high-yield momentum of steel mills

As of the end of April, the profit margin of the 247 steel mills monitored by Mysteel had risen to 58%, and the average daily output of molten iron also rebounded to 2.44 million tons, reflecting that the temporary profit recovery once stimulated the willingness of steel mills to increase production. However, judging from the trend of spot prices, the decline in the prices of finished products is generally greater than that of raw materials, and the trend of continuous compression of profits remains obvious.

According to the Mysteel model calculation, the spot profit of steel in April decreased by 43 yuan per ton month-on-month to 39 yuan per ton, indicating that the compression of profits is gradually suppressing the momentum of steel mills to increase production. Although current profits have not yet fallen into the loss range, steel mills' willingness to significantly expand production in the future is clearly becoming more cautious.

Under the pattern of "strong supply and weak demand", the profits of steel mills may continue to be doubly squeezed:

The high output of molten iron will still support the prices of raw materials, resulting in a greater decline in steel prices than that of raw materials.

The seasonal weakening of terminal demand will continue to undermine the bargaining power of the finished product end.

This means that steel mills will face an unfavorable structure of "falling steel prices and hard raw materials", and their profit margins will be further compressed.

From the cost perspective, the production cost of steel is likely to decline slightly. Based on the current iron ore production at 760 yuan per ton and Huaibei metallurgical coke at 1,450 yuan per ton, it is estimated that the average production cost of rebar in Jiangsu Province in May will be 3,130 yuan per ton, a decline of approximately 8 yuan per ton compared to April. The decline is limited and it is difficult to significantly improve the profit margin.

In late May, the steel price competition focused on the pace of production decline

In early May, steel production had already reached a marginal peak turning point. However, as some steel enterprises still have profit margins, they lack the willingness to carry out large-scale and concentrated production cuts in the short term. It is estimated that the average daily output of molten iron in May will only slightly decrease by 10,000 tons compared to April, reaching around 2.4 million tons, and the overall output remains at a relatively high level.

It should be particularly noted that the late May will enter the seasonal off-season for steel demand. The flood season in southern regions has disrupted the construction pace. Coupled with the continuous decline in steel export orders, the demand side will face further downward pressure.

In this context, if steel mills fail to regulate their production in a timely manner, the mismatch between supply and demand will further intensify, potentially creating a risk point for a new round of concentrated outbreak of supply and demand contradictions. Once the accumulation rate of inventory accelerates and market expectations fail to form support, steel prices may fall below the bottom range and enter a downward channel of breaking through.

Therefore, in the second half of May, the focus of the steel price game will gradually anchor on the extent and pace of production adjustment. Whether the release of production capacity can be effectively restrained will become the key variable determining the future market trend.

In early April, the intensification of the tariff friction between China and the United States led to a rise in market risk aversion, and the spot price of Shanghai rebar once dropped to the year's low of 3,130 yuan per ton. Although the sentiment recovered somewhat later, under the dominance of fundamental pressure, the price failed to rebound effectively and remained in a low-level volatile state overall.

The core suppressing factor in the rebar market in April still lies in the mismatch between supply and demand. On the one hand, the monthly average weekly apparent demand was 2.59 million tons, a year-on-year decrease of 8.5%. On the other hand, driven by both maintaining profits and proactively reducing inventory, the average monthly output of steel mills increased by 6.6% year-on-year to 2.298 million tons. The slope of total inventory reduction was only -3.8%, significantly lower than -6.1% in the same period last year, and the inventory pressure continued to rise. As a result, the average spot price of Shanghai rebar in April dropped by 90 yuan per ton month-on-month to 3,176 yuan per ton.

Entering May, demand still has some support in the short term. The concentrated restocking of projects after the holiday, coupled with the seasonal construction inertia, is expected to cause the surface demand to rise to 2.62 million tons in the first ten days. However, as the rainy season in the south gradually unfolds, the slowdown in construction pace will drag down terminal demand. The on-board demand at the end of the month is expected to fall back to 2.4 million tons, lowering the monthly average to 2.47 million tons, a 4.6% decrease compared to the previous month.

Although there has been marginal improvement in the financial aspect, the actual support intensity remains limited. The pre-issuance of special bonds has driven the recovery of infrastructure investment expectations (as of April 27th, a total of 938.8 billion yuan of normal new special bonds have been issued, an increase of approximately 41.5% year-on-year), but the situation of project funds in place is still insufficient. Mysteel's research shows that although the capital availability rate of leading construction enterprises has rebounded to over 60%, it is still 5 percentage points lower than the same period last year. Meanwhile, real estate investment and the availability of funds have continued to face pressure. The year-on-year decline in the first quarter has continued to expand, and the drag on steel consumption in the real estate sector has deepened.

On the supply side, the pace of adjustment lags behind that of demand. It is expected that the average monthly output of small-sample rebar in May will slightly decline by 0.5% to 2.28 million tons, with a decrease of only 60,000 tons, remaining at a relatively high level overall. At present, blast furnace steel mills lack the motivation to reduce production when their profits are still acceptable (for example, the profit per ton of steel in Jiangsu region is about 40 yuan per ton) and the inventory is continuously being reduced. Although electric furnace enterprises have fallen into losses, due to considerations of cost dilution and maintaining market share, their overall willingness to reduce production is not strong. It is estimated that there is only about 20,000 tons of adjustment space for electric furnace output, and the capacity utilization rate may still remain above 50%.

Overall, there are still some supporting factors in the market in the first half of May. The post-holiday concentrated inventory replenishment will drive a temporary recovery in demand. It is expected that the inventory reduction pace can be maintained between 200,000 and 300,000 tons. Coupled with the phenomenon of insufficient specifications in some regions and brands, it will provide marginal support for the supply and demand structure.

However, it is necessary to be vigilant against the risks brought about by the rapid ebb of the demand peak in the middle and late part of the month. As the impact of the slowdown in construction and weak exports gradually becomes apparent, it is expected that by the end of May, the total inventory reduction rate will significantly narrow to within 100,000 tons, and the year-on-year decline in the inventorship to sales ratio will also narrow simultaneously, with market pressure rising again. Based on a comprehensive assessment, the average spot price of Shanghai rebar in May is expected to decline by 26 yuan per ton month-on-month to 3,150 yuan per ton, and the overall trend may show a pattern of "stability at the beginning and pressure at the end".

Hot-rolled coil: In April, under the influence of the escalating threat of overseas tariffs, market sentiment weakened, and the prices of black series dropped rapidly, with hot-rolled coil performing particularly well. The average spot price of hot-rolled coil in Shanghai dropped by 110 yuan per ton month-on-month to 3,268 yuan per ton, marking the biggest monthly decline since September 2024.

In April, the demand for hot-rolled coil exports turned from growth to decline. Mysteel's research shows that the planned export volume of hot-rolled coil in April dropped by 3.3% compared with March. The decline in exports directly dragged down overall demand. The average demand for hot-rolled coil samples this week decreased by 56,000 tons compared with March to 3.24 million tons.

Against the backdrop of weakening demand, production profits continue to be under pressure. According to Mysteel's statistics, the profit per ton of hot-rolled steel in North China declined by 50 yuan per ton month-on-month to 132 yuan per ton in April. Since the end of March, orders from steel mills have weakened, and inventories have returned to the accumulation channel. Some steel mills have chosen to control the supply pace through maintenance. The average output of hot-rolled coil samples this week dropped by 30,000 tons compared with the previous week to 3.17 million tons in April.

Under the dual decline in supply and demand, the pace of inventory reduction for hot-rolled coils has slightly narrowed by 2 percentage points to 7%. It is expected that the hot-rolled coil in May will continue to show a simultaneous decline in supply and demand, with fundamental contradictions gradually accumulating. However, against the backdrop of relatively moderate supply and the existence of short-term resilience in demand, the contradictions are unlikely to erupt in a concentrated manner in the middle and first ten days.

In the short term, domestic demand in the manufacturing industry may offset some of the export pressure. Data from Industrial Online shows that on May 3rd, the year-on-year growth rate of planned sales of large white goods expanded by 4 percentage points to 10.3%, and the overall planned output increased by 6% year-on-year. The boost in domestic sales will continue to support the consumption of sheet materials. Meanwhile, the Political Bureau of the Central Committee proposed to accelerate the issuance and utilization of "ultra-long-term special Treasury bonds". The relevant funds will be used for policy subsidies in the "two new" fields. It is expected that the accelerated implementation of policies in the second quarter will release some manufacturing demand, and key industries such as automobiles may benefit first.

In terms of exports, although orders have generally declined, price competitiveness still exists. In April, the export price of hot-rolled coil dropped, widening the price gap with the markets of South Korea and Vietnam to over 7 US dollars per ton. Currently, the export price gap in the mainstream markets is generally over 50 US dollars per ton. Mysteel's research shows that the export order intake situation of steel mills in Northeast China and South China improved marginally at the end of April, indicating that the resilience of hot-rolled coil export demand remains. Although the planned export volume of hot-rolled coils in May was 1.09 million tons, a decrease of 5.8% compared with the previous month, and the decline rate slightly expanded by 2.5 percentage points compared with April, the overall pace of decline was relatively stable.

In terms of output, under the dual pressure of weak export expectations and declining profits, steel mills' willingness to increase production has significantly weakened. Except for some steel mills that have initiated routine annual inspections, some steel mills in East China plan to arrange nearly 20 days of maintenance in May. It is expected that the average output of hot-rolled coil samples in May this week may be slightly reduced to 3.16 million tons, and the supply pressure is unlikely to increase significantly in the short term.

Overall, it is judged that the fundamental contradictions of hot-rolled coil will continue to accumulate slowly, and the price center of gravity will continue to fluctuate and show a relatively weak trend. Although the downward trend in demand is clear, the short-term restraint on the supply side and the remaining resilience in exports will to some extent slow down the pace of price decline. It is expected that the average spot price of Shanghai hot-rolled coil in May will be 3,210 yuan per ton, a decrease of 58 yuan per ton compared with the previous month, showing a moderate downward trend.

Iron ore: In April, the overall price of iron ore showed a narrow range of fluctuations after a sharp rise and a fall. The monthly average price of PB powder at Qingdao Port was 766 yuan per ton, a decrease of 10 yuan compared with the previous month. At the beginning of the month, the United States proposed the so-called "equivalent tariff" measures, which far exceeded market expectations, triggering a concentrated release of stampede sentiment in the commodity market. The price of iron ore rapidly dropped from 788 yuan per ton to the mid-month low of 741 yuan per ton. Subsequently, market sentiment gradually recovered. Coupled with the high operating rate of domestic steel mills, the output of molten iron continued to rise, driving the ore price to slowly recover from the bottom to around 760 yuan per ton.

The current market is generally bearish on the medium and long-term trend of iron ore. The main logic is that steel exports and domestic demand may weaken simultaneously in the next stage. After the profits of steel mills contract, they may be forced to cut production, forming a negative feedback chain of "weakening demand - shrinking profits - downward trend of iron ore".

However, judging from the current supply and demand structure, the average gross profit per ton of steel for steel mills in May still remained above 100 yuan. The national steel inventory pressure is not significant, and the average daily output of molten iron is expected to stabilize at around 2.4 million tons. Meanwhile, the inventory of iron ore at ports still shows a slight trend of reduction, and the supply pressure is relatively controllable in the short term.

Based on a comprehensive assessment, although medium and long-term risk expectations are still accumulating, it is unlikely that iron ore prices will show a trend of decline before there is a substantial drop in demand. It is expected that the price will maintain a range-bound fluctuation trend in May. It is predicted that the monthly average price of PB powder at Qingdao Port will be 760 yuan per ton, a slight decrease of 6 yuan compared with the previous month.

In April, the price trends of double coke were differentiated: The average price of quasi-first-grade coke at ports was 1,345 yuan per ton, a decrease of 26 yuan compared with the previous month. The average price of low-sulfur main coking coal in Linfen was 1,315 yuan per ton, rising by 26 yuan compared with the previous period.

Within the month, as the output of molten iron continued to rise, the fundamentals of coal and coke improved marginally, and the spot prices stopped falling and started to rise. Although the round of price hikes for coke experienced some twists and turns, it was eventually successfully implemented. However, looking ahead to May, the competition over the prices of dual-coke is expected to intensify further.

First of all, the price divergence mainly revolves around the contradiction between supply and demand. At present, the output of molten iron from 247 steel mills remains at a historically high level