In the first half of September, steel prices remained within a narrow range. Although major steel mills continued to raise their pricing policies in the latter part of the year, their support for the market was limited. By the end of the month, financial pressure became more evident. Businesses were actively selling goods, but on-site purchases remained cautious. Overall demand did not show significant changes. On the other hand, with the "Jinjiu" bull expectation, there was limited room for further price declines. Overall, the market experienced a weak and stable adjustment during the ten-day period.
The inversion rate in the market has widened significantly. For example, Shagang's price for 32mm rebar was around 3,690 yuan/ton at the end of August. The current mainstream price in Jiangsu, Zhejiang, and Shanghai is approximately 3,557 yuan/ton, which means a downward adjustment of 133 yuan/ton. This is a much larger decline compared to the 70 yuan/ton seen at the end of the previous ten days. The volume of inverted transactions has increased sharply.
During the tenth month, Tangshan billet prices also saw a narrow adjustment. As of now, the contract price of Tangshan has dropped by 50 yuan/ton. In addition, the Platts iron ore index (62% PB powder, CFR) rose by $3.5/ton from the end of August and remains around $140. The firmness of raw material prices provides some support to steel mills. Meanwhile, traders have suffered significant losses over the past ten days. The average price in each region has shifted from positive to negative growth. After deducting rebates from steel mills, most traders lost between 70-80 yuan per ton.
The market inversion has reached as high as $100, and recent price fluctuations have been turbulent. Although the new round of steel mill production appears weak, the high production costs and the "golden September" psychological preference suggest that Shagang's stability remains strong. Additionally, while the steel market was in an uptrend throughout August, the continuous increase in factory prices left traders with little profit and even some losses. Steel mills may introduce certain recovery policies to support traders. Based on current market trends and expectations, the Information and Building Materials Research Group anticipates that Shagang will adjust its factory price in early September, potentially increasing it by RMB 50/t.
Looking ahead to the pre-September forecast: If major steel mills push up their factory prices, with the fixed cost of delivery, merchants are likely to reduce their willingness to lower prices further. Meanwhile, HSBC reported that China’s manufacturing PMI initial reading for August was 50.1, marking a return to above 50 after three months of contraction. This indicates a significant improvement in the activity of China’s manufacturing sector. As the economy recovers, consumer demand is expected to rebound, which could stimulate steel consumption. However, steel mills are likely to prioritize production and possibly push prices higher again, leading to increased supply-demand conflicts and limiting the rebound in steel prices. Overall, the market is expected to remain in a narrow adjustment range in early September.
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