On March 1st, the "National Five" real estate policies were further tightened, marking a significant shift in government intervention. Previously, the five measures had been relatively moderate, and the market had responded with indifference, as housing prices continued to rise without much impact. This lack of effect forced authorities to introduce more stringent regulations quickly. Over recent years, numerous real estate policies have been introduced, including the "Four National Policies," "Ten New Policies," "Five New Policies," "Eight New Policies," "Fifteen Beijing Measures," and others. While these measures are expected to continue, the author believes that most of them are temporary fixes, with limited long-term influence on the steel market.
The implementation of the "State Five" has had a profound impact on the real estate sector, stock markets, and the broader domestic economy. For the steel industry, this has led to a sharp decline in market confidence, with traders becoming increasingly pessimistic. Steel prices and stock values have fluctuated wildly, with spot prices continuing to fall. As of the close of March 1st, the average price of Ф25mm third-grade rebar in key cities reached 3,865 yuan, down by 14 yuan from the previous day. Similarly, the price of Ф6.5mm high line stood at 3,735 yuan, also dropping by 14 yuan.
During this period, crude steel production, steel inventory, and billet stocks in the Tangshan market all rose steadily, significantly increasing supply pressure. According to the latest data from the China Iron and Steel Association, the average daily crude steel output for major and medium-sized enterprises in mid-February was 1.719 million tons, up 1.01% month-on-month. Nationally, the estimated average daily crude steel production was 2.006 million tons, an increase of 0.9% compared to the previous month. While upstream supply is picking up, downstream demand remains weak. Although there has been some improvement since the end of last week, it is still too early to see a significant rebound in demand.
Although the full impact of the "National Five" may take time to materialize, it has already begun to affect the mindset of steel traders. However, the author believes that while short-term trends may be influenced, the long-term impact will not be revolutionary. The main reason is that steel costs remain high, which will support price floors. Currently, imported Indian iron ore has surpassed $160 per ton, and rail freight rates have increased by 13%. Additionally, with the upcoming national conference in early March, new leadership is expected to bring about some positive and supportive policies. Furthermore, recent railway news indicates that 38 infrastructure projects worth RMB 420 billion will be launched, which could boost steel demand.
In conclusion, neither steel mills nor traders are acting aggressively at the moment. This cautious approach stems from the lessons learned from last year's bad loan issues. The steel market remains unclear, and downstream demand has yet to improve. As a result, the current narrow price adjustments are likely to persist for some time.
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