Analysis of the Domestic Steel Market under the Current Situation

The domestic steel market is currently being buffeted by a confluence of conflicting factors. Ongoing geopolitical tensions in the Middle East continue to roil the cost side, while targeted domestic growth-stabilizing policies provide underlying support for the market. Fundamentally, the industry is trapped in a contradictory triad ofelevated costs, sluggish demand, and high inventories, sparking intensified long-short competition on futures and leaving the overall market stuck in a range-bound trend with firm upside resistance.

Geopolitical Uncertainty Supports Costs, But Upside Momentum Fades

The persistent conflict in Iran has emerged as a pivotal external variable weighing on the steel market, exerting impacts primarily through two channels: cost transmission and market sentiment. The conflict has escalated shipping risks through the Strait of Hormuz, triggering a sharp surge in international dry bulk freight rates and directly pushing up the cost, insurance, and freight (CIF) costs of core raw materials including iron ore and coking coal, thus forming a rigid floor for steel prices. Meanwhile, heightened concerns over crude oil supply disruptions have lifted energy product prices, with bullish sentiment spilling over into coking coal and other fuel varieties, further driving up steel mills’ production costs and reducing their incentive to cut output.

That said, geopolitical conflicts are inherently phased and fraught with uncertainty. Following the U.S. statement indicating a push to end the conflict, worries over crude oil supply tightness have eased notably. The energy-driven logic that previously fueled raw material price gains has largely been priced in, leading to marginal weakening of cost-side upward momentum — a trend reflected in today’s sharp crude oil price correction. Additionally, the conflict has disrupted steel exports from the Middle East; while exporters have shifted orders to Southeast Asia, this shift fails to fully offset the export shortfall, indirectly capping the upside potential for steel prices.

Domestic Growth-Stabilizing Policies Provide Firm Underlying Support

The ongoing implementation of the Work Plan for Stabilizing Growth in the Iron and Steel Industry (2025-2026) stands as the core pillar for steady operation of the domestic steel market. The plan sets a target of roughly 4% annual growth in industrial added value, and seeks to achieve dynamic supply-demand balance and ease operational pressure on enterprises through targeted capacity and output regulation, expanded supply of high-end steel products, and unlocked downstream consumption potential. Meanwhile, the issuance of new special-purpose bonds accelerated significantly year on year in the first quarter, with 81% of the funds channeled into project construction. The advancement of key livelihood projects and infrastructure development has laid solid policy groundwork for the recovery of steel demand.

Prominent Supply-Demand Imbalance Remains Unresolved

The market is currently defined by recovering supply, tepid demand recovery, and persistently high inventories, with the fundamental supply-demand imbalance yet to be fundamentally alleviated. On the supply side, hot metal production hit a recent low earlier due to production restrictions during major conferences and sustained losses at steel mills. However, with concentrated production resumption across steel mills in mid-March, hot metal output is projected to rebound to around 2.3 million tonnes over the next two weeks, accompanied by a gradual pickup in short-process steel mill production, adding to supply-side pressure. For now, most enterprises follow a “production based on sales” model, which has mitigated oversupply risks to a limited extent.

On the demand side, seasonal recovery remains weak: downstream construction and manufacturing demand is picking up gradually, but the recovery pace falls short of market expectations and is marked by stark regional divergence. While key construction projects have started smoothly, small and medium-sized projects have lagged in work resumption due to funding shortages and slow payment collection. In the manufacturing sector, demand from automobiles and shipbuilding has improved marginally, but sheet consumption has posted negative year-on-year growth for three consecutive weeks. External demand has also weakened marginally, pressured by Ramadan in the Middle East and rising global trade protectionism, leading to softer export orders. Overall, demand is characterized byregional mismatches and insufficient recovery momentum.

Intensified Long-Short Futures Competition, Range-Bound Trend Intact

The rebar contract has rebounded from recent lows, trading within an intraday range of 3,135 yuan to 3,167 yuan per tonne, with mild expansion in trading volume and fierce long-short rivalry. Technically, the contract is range-bound between 3,100 yuan and 3,170 yuan per tonne; while the MACD indicator shows a slight upward tilt, thin trading volume rules out a one-sided trend. The iron ore 2605 contract finds support from ongoing steel mill production resumption. Overall, futures trends are jointly shaped by cost-side support, demand-side constraints, and policy guidance, making a breakout from the range-bound pattern unlikely in the short term. Steel prices face downward correction risks if demand recovery underperforms; conversely, accelerated inventory destocking and further policy stimulus could push prices above the upper range, towards the 3,190-3,200 yuan per tonne level.

Comprehensive Summary and Operational Recommendations

On balance, the market is shrouded in high uncertainty, with the steel market stuck in a stalemate defined by cost support, weak demand recovery, policy underpinning, and inventory pressure. The recommended near-term strategy centers on range trading, buying low and selling high, and strict risk control.

For the rebar 2605 contract, focus on the core trading range of 3,100-3,170 yuan per tonne and adopt a high-selling, low-buying approach. Spot traders should maintain light inventories and fast capital turnover, make purchases on an as-needed basis, and sell to lock in profits when prices rebound above 3,160 yuan per tonne. Downstream end-users are advised to replenish inventories gradually and purchase in batches based on actual production needs.