Steel prices fluctuate in search of bottom: a fragile balance amid collapsing costs and weak demand

— An Analysis of the Market Amid Industrial Chain Profit Redistribution and Absent End-User Demand

For the week ending October 19, the steel market presented a complex picture of "a downward shift in price centers, passive profit recovery, and inventory structure divergence." The Lange Composite Steel Price Index stood at 3,510 yuan/ton, up 0.2% day-on-day, but still down 0.2% week-on-week and down 0.4% month-on-month. The driving logic has shifted from a one-way "cost collapse" to a tug-of-war between "narrowing marginal cost easing" and "fading post-holiday restocking pulse." Industrial chain profits are being redistributed between steel mills and traders, while signals of substantive improvement in end-user demand remain absent. This article analyzes the market across five dimensions: price structure, the cost side, supply and demand, profit distribution, and outlook.

I. Price Structure and Product Divergence: Flat Products Under Significant Pressure, Long Products Slightly More Resilient

Looking at the index details, divergence among product varieties has intensified. The absolute price index for flat products stood at 3,570 yuan/ton, down 0.4% week-on-week and down 1.0% month-on-month; the long products index stood at 3,385 yuan/ton, down only 0.1% week-on-week and actually up 0.5% month-on-month. This divergence directly reflects structural differences on the demand side: the construction segment, supported by low output, has some capacity to resist declines, while steel for manufacturing faces greater destocking pressure.

Among specific varieties, the hot-rolled coil index stood at 3,347 yuan/ton, down 0.4% week-on-week and down 1.1% month-on-month; cold-rolled coil at 3,803 yuan/ton was flat day-on-day but down 3.5% year-on-year, the weakest year-on-year performer in the flat products group. Medium plate stood at 3,603 yuan/ton, down 0.6% week-on-week, with accumulation pressure in northern regions continuing to suppress price elasticity. Rebar stood at 3,327 yuan/ton, down 0.1% week-on-week while still maintaining 0.5% positive growth month-on-month, with bottom support from low output and low inventories remaining relatively effective.

II. Cost Side: Coke Price Cut Stalemate, Iron Ore Accumulation Pressure Persists

On the coke side, the second round of price cuts was fully implemented on October 12, with wet-quenched coke cumulatively reduced by 200 yuan/ton and dry-quenched coke cumulatively reduced by 220 yuan/ton, but the third round of cuts has stalled. As of October 16, the average ton-of-coke profit at 30 independent coking plants nationwide had fallen to -52 yuan/ton, with some regional coking enterprises voluntarily limiting production by 30%–40%. Coking coal prices have stopped falling and stabilized with a rebound, providing cost-side support for coke and constraining further price cuts. On the steel mill side, daily hot metal output at 247 blast furnaces averaged 2.3366 million tons, with the absolute volume still generating rigid consumption of coke, though some integrated mills have started blast furnace maintenance, showing signs of marginal demand contraction.

On the iron ore side, supply-side pressure remains unabated. The latest global iron ore shipment volume was 30.882 million tons, down 3.991 million tons week-on-week, but China's 45-port arrival volume was 24.228 million tons, up 1.192 million tons week-on-week, indicating a phased recovery in arrival pace. On inventories, total imported iron ore inventory at 47 ports stood at 173.6917 million tons, up 546,500 tons week-on-week, with the accumulation pattern not yet reversed. Steel mills maintain low-inventory strategies under low-profit conditions, with insufficient restocking willingness, and ore prices lack upward drivers from the demand side.

Taken together, the net effect on the cost side is: the room for further downward movement in steel mills' spot costs has clearly narrowed, the supporting effect of coke has marginally strengthened, but iron ore accumulation pressure is still being transmitted to the finished steel side.

III. Supply and Demand: Discerning the "Quality" of the Apparent Demand Pulse

On the supply side, weekly rebar output was 1.7389 million tons, up 36,200 tons week-on-week and down 272,700 tons year-on-year, still at a four-year low for the same period. Hot-rolled coil output was 2.8352 million tons, down 86,000 tons week-on-week and down 383,200 tons year-on-year. Total inventory of the five major varieties was 14.7983 million tons, down 686,100 tons week-on-week, with all varieties except medium plate achieving destocking.

On the demand side, apparent rebar consumption was 2.2227 million tons, up a sharp 826,900 tons week-on-week, but this increase has a significant base effect—the previous week (week of October 9) apparent demand was only 1.3958 million tons, an abnormally low value due to holiday disruption. Hot-rolled coil apparent demand was 3.0125 million tons, up 344,300 tons week-on-week but still down 143,000 tons year-on-year. Total apparent demand for the five major varieties was 8.6313 million tons, up 1.537 million tons week-on-week. However, Guoxin Guozheng Futures clearly pointed out that high-frequency daily rebar transactions remain at their lowest level for the same period in recent years, and the sustainability of apparent demand improvement is questionable, with continued weakness in downstream industries dragging on steel prices.

Exports have become a marginal buffer. During the week of October 6–12, China's steel export shipments were 3.0467 million tons, up a sharp 46.2% week-on-week, hitting a new weekly high for the year; among these, Singapore re-export volume surged from 525,900 tons to 1.4696 million tons, with the Southeast Asia direction rising to a 64.8% share. September monthly steel exports were 10.492 million tons, with January–September cumulative exports at 85.641 million tons, down 2.6% year-on-year. The phased surge in exports has to some extent diverted domestic supply pressure, but the flow structure dominated by re-export trade means its stability is highly susceptible to overseas price spreads and policy disruptions.

IV. Profit Distribution: Passive Recovery for Steel Mills, Mounting Pressure on Traders

After the second round of coke price cuts was implemented, the profitability rate of 247 steel mills recovered 1.30 percentage points week-on-week to 8.23%, though the absolute level remains at a historical low. The essence of this recovery is a passive result of cost declines temporarily exceeding finished steel price declines, rather than an active improvement driven by demand expansion. Guojin Securities noted that weak flat product demand absorption and rebounding coal prices may still limit the extent of profit recovery.

Pressure at the trading segment is more direct. Social inventories of medium plate in the northern region are accumulating rapidly, with North China becoming the main accumulation driver. Under downward price expectations, traders face an intensified dilemma of "selling means losses, stockpiling means tying up capital." For cold-rolled varieties, traders generally adopt a strategy of "accepting the rigid portion, rejecting the excess portion" for forward-month orders, with order contraction for specialty steels evident. The reservoir function of the circulation segment is weakening, with inventory pressure remaining more at the steel mill and agreement-holder levels.

V. Outlook: Fragility of the Weak Balance and Conditions for a Breakthrough

The current market's "weak balance" rests on three fragile assumptions: first, that the third round of coke price cuts continues to not materialize, keeping cost support effective; second, that steel mills maintain low-output discipline under meager profits, with no concentrated resumption of production; third, that high-level export shipments can continue, offsetting domestic trade pressure.

From high-frequency data, all three conditions face challenges. Although coking plant production restrictions constrain supply, steel mills' price-cutting intentions remain, and the equilibrium point of the steel-coke game is not stable. The recovery in steel mill profitability itself is undermining the endogenous motivation for production cuts—once profits recover further, restart pressure will follow. On exports, the surge in Singapore re-export volume has obvious characteristics of concentrated post-holiday operations, and its sustainability needs to be observed through subsequent weekly data.

Hua'an Futures' assessment is representative: coal mine supply-guarantee policy efforts will loosen cost support, and combined with steel mills maintaining loss-resistant production despite losses, weakening cost support will further compress upward room for steel prices, with a medium-to-long-term tendency toward continued pressure and pullback. Before signals of improved project funding availability or accelerated formation of infrastructure physical workload appear on the demand side, steel prices lack a basis for trend reversal, with the short-term tone still one of fluctuating toward a bottom.

Conclusion

In summary, the steel market is currently caught between marginally weakening cost support and questionable sustainability of demand improvement. Product divergence, profit redistribution, and the export buffer together constitute a short-term weak balance, but the fragility of this balance cannot be ignored. Three major variables—the coke price cut game, steel mills' impulse to restart production, and export sustainability—will determine the market's direction. Before substantive improvement signals appear in end-user demand, the market is likely to continue fluctuating toward a bottom.