In late February, the trend of steel prices stabilized as the market moved into a period of lower demand. Domestic steel demand remained weak, and with a surge in steel production, the imbalance between supply and demand worsened, causing prices to continue their downward trend. As temperatures began to rise, it was expected that market demand would gradually improve, but overall, the improvement was limited, making it difficult for steel prices to rebound sharply.
1. **Domestic Steel Prices Continue to Decline**
At the end of February, the CSPI comprehensive index for steel products stood at 96.46 points, down 1.19 points from the previous period, a 1.22% decrease. This marked the sixth consecutive month of decline, with the drop being 0.28 percentage points smaller than the previous month. The long product price index fell by 1.68 points (a 1.67% drop), while the sheet metal index dropped by 0.74 points (a 0.76% decline). Long products saw a steeper fall, 0.91 percentage points more than sheets. Compared to the same period last year, the long product index dropped by 14.66 points (12.94%), and the sheet metal index fell by 15.85 points (14.17%).
2. **Major Steel Products See Continued Price Drops**
By the end of February, eight major steel products monitored by the China Iron and Steel Association continued to decline. Except for cold-rolled steel and hot-rolled seamless tubes, the rate of decline narrowed compared to the previous month. High-line and rebar prices dropped by RMB 58/ton and RMB 78/ton, respectively, while angle iron fell slightly by RMB 8/ton. Plate, hot rolled coil, cold rolled sheet, galvanized sheet, and seamless steel pipe prices decreased by 11, 24, 31, 5, and 49 yuan/ton, respectively.
3. **Weekly Trends Show Persistent Weakness**
Throughout February, steel prices showed a slight downward trend each week. By the second week of March, the CSPI steel price index had fallen for 11 consecutive weeks, reflecting ongoing weakness in the market.
**Market Analysis of Steel Price Changes in February**
The domestic steel market remained in an off-season, with weak demand and high production levels intensifying the supply-demand imbalance. Additionally, falling raw material prices further weakened the supporting effect on steel prices.
1. **Slower Growth in Steel Demand**
According to data from the National Bureau of Statistics, fixed asset investment in January–February rose 17.9% year-on-year, down 3.3 percentage points from the previous year. Construction project investments increased 16.8%, 2 percentage points less than the same period last year. Industrial output above designated size grew 8.6%, 1.3 percentage points lower than the previous year. The manufacturing PMI in February was 50.2%, down 0.3 percentage points from the previous month, marking the third consecutive monthly decline. New orders fell by 0.4 percentage points, and PPI dropped 2.0% year-on-year, continuing for 24 months. Money supply growth slowed, with M2 increasing 14.2% year-on-year, down 0.1 and 0.8 percentage points from the same period last year. Net cash withdrawal reached 1.42 trillion yuan, and new loans were only 644.5 billion yuan, down 51.2% from the previous quarter. Overall, steel demand remained weak due to slower downstream growth.
2. **Rising Steel Production Intensifies Oversupply**
Steel production in January–February totaled 116.72 million tons of pig iron, 13.80 million tons of crude steel, and 165.73 million tons of steel, up 0.2%, 1.7%, and 4.9% year-on-year, respectively. Daily crude steel output reached 2.217 million tons, up 10.2% from December. Exports surged to 11.57 million tons, up 26.3%, while imports rose 16.8%, leading to a net export of 982 thousand tons. With demand still low in the off-season, oversupply worsened, putting pressure on prices.
3. **Raw Material Prices Fall, Weakening Steel Price Support**
Iron ore and coking coal prices fell sharply in February. Domestic iron concentrate and imported iron ore prices dropped 27 and 50 yuan/ton, respectively, a 2.77% and 5.56% decline. Coking coal and metallurgical coke prices fell 80 and 110 yuan/ton, a 7.34% and 8.45% drop. Scrap prices also declined by 24 yuan/ton. These declines weakened the support for steel prices.
**International Market Trends**
Steel prices globally continued to fall. At the end of February, CRU’s global steel price index stood at 164.9 points, down 3.4 points from the previous quarter, or 2.0%. Long products and sheet prices both declined, with long products dropping 4.4 points (2.4%) and sheet metal falling 2.7 points (1.7%). Compared to the same period last year, long products fell 22.4 points (11.1%), and sheet metal dropped 12.5 points (7.3%).
**Regional Market Developments**
In North America, the CRU steel price index fell 5.3 points (2.9%) to 174.6. U.S. manufacturing PMI rose 1.9 percentage points to 53.2%, but the production index dropped 6.6 percentage points. In Europe, the CRU index fell 3.8 points (2.4%) to 156.5. Germany and Italy saw declines in their manufacturing PMIs, while France remained below 50. In Asia, the CRU index dropped 2.5 points (1.5%) to 165.0. Japan, China, and South Korea all saw declines in their manufacturing PMI indices, with steel prices in the Far East showing mixed trends.
**Future Outlook for Steel Prices**
With warmer weather, domestic steel demand is expected to gradually recover. However, economic pressures suggest that demand growth will remain slow. While the market may stabilize in the coming months, a sharp recovery in prices is unlikely.
1. **Economic Growth and Steel Demand**
China's GDP target for this year is set at around 7.5%, slightly lower than last year. A proactive fiscal policy and prudent monetary policy are expected to maintain stable growth, with fixed asset investment projected to grow 17.5%. Urbanization remains a key driver of economic growth, creating long-term demand for steel in infrastructure and housing. However, with economic slowdowns, steel demand growth is expected to moderate.
2. **High Inventory Levels Pressuring Prices**
As of early March, the CSPI steel price index hit its lowest level since 2006 at 95.43 points. Despite expectations of a bottoming out, inventory levels have risen rapidly, creating pressure on steel prices. Although some reduction is expected, the large stockpiles from earlier periods will continue to weigh on prices.
3. **Raw Material Prices Still Have Room to Fall**
Although coking coal prices have risen slightly, iron ore prices have continued to fall. At US$107.89/ton, imported iron ore remains well below historical levels, providing continued downward pressure on steel prices.
**Key Concerns for the Future**
First, high steel production levels are not favorable for price rebounds. Second, low steel prices hurt enterprise efficiency, as cost reductions are not keeping pace. Third, increasing international trade tensions make it harder for Chinese steel companies to export.
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