Overall, bulk commodities in the ferrous metals sector showed a weak trend on the morning of July 14, followed by a rebound in the afternoon, making the overall trend slightly stronger. However, there was no significant breakthrough, and the market remained caught between upward pressure and downward support. It is difficult to accurately judge the subsequent trend in the short term, and further observation of the breakthroughs in both directions is needed. For now, the market should be treated as slightly strong.
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Spot market: Trading was lackluster, with the heated atmosphere cooling down. Overall, prices remained stable, with adjustments in some regions ranging from -20 to -40 yuan/ton.
Focus points: Steel demand and production cuts; the real estate sector is expected to bottom out and stabilize; market sentiment shifts from chasing trends to waiting for outcomes.
Factors affecting steel prices:
1. Domestic steel demand is likely to decline in the second half of the year
The vice president of the China Iron and Steel Association stated that in the short term, domestic steel demand is likely to continue to decline in the second half of 2025. The supporting role of the construction industry in steel demand will continue to weaken. Steel demand from the manufacturing industry has been the core driver of growth in steel consumption in recent years, but there are some potential unfavorable factors. Considering factors such as trade frictions and U.S. tariff policies, the high-level export of steel products in the second half of the year may not be sustainable.
This statement is quite consistent with the mainstream view of the market. Judging from the situation of the five major steel products last week, the current rate of decline in output is basically consistent with the apparent demand, which is well controlled. If steel demand is expected to weaken in the second half of the year, the importance of production cuts will inevitably become prominent. Production cuts are the main focus of recent speculation and the main driver that can lead to a positive trend in steel prices in the second half of the year.
2. Accelerated debt restructuring of real estate enterprises; the real estate sector is expected to bottom out and stabilize
Recently, the debt restructuring of real estate enterprises has been accelerating. Up to now, more than 14 real estate enterprises have obtained approval for debt restructuring or reorganization. In addition, some real estate enterprises' overseas debt restructuring has been basically approved by creditors and will proceed to the hearing. Some institutions believe that for real estate enterprises that have already faced risks, the debt restructuring method is accelerating from extension to debt reduction. As the maturity scale of the public market shrinks in 2025 and industry sales gradually bottom out, the real estate market is expected to bottom out and stabilize.
Debt restructuring is a key step for risky real estate enterprises to "save themselves". With the advancement of domestic policies, the overall credit pressure in the real estate industry is expected to ease. Although we do not believe that the steel demand in the domestic construction industry will improve within 1-2 years, the reduction of debt pressure on real estate enterprises will also provide guarantees for ongoing projects and reduce the probability of large-scale spread of credit risks.
Spot market overall stable and slightly weak
According to data from the China Steel Network APP: Among 24 construction materials markets, 1 market increased by 40 yuan/ton, and 2 markets decreased by 10 yuan/ton. The average price of 20mm HRB400E rebar was 3255 yuan/ton, up 3 yuan/ton from the previous trading day. Among 24 hot-rolled coil markets, 1 market increased by 10 yuan/ton, and 7 markets decreased by 10-20 yuan/ton. The average price of 4.75mm hot-rolled coil was 3290 yuan/ton, down 3 yuan/ton from the previous trading day. Among 24 medium and heavy plate markets, 3 markets increased by 10-40 yuan/ton, and 3 markets decreased by 10 yuan/ton. The average price of 14-20mm ordinary medium plates was 3446 yuan/ton, up 1 yuan/ton from the previous trading day.
Futures slightly stronger
On July 14, the main contract of rebar in the ferrous metals sector rose by 5, closing at 3138, an increase of 0.16%; the main contract of hot-rolled coil rose by 3, closing at 3276, an increase of 0.09%; the main contract of iron ore rose by 2, closing at 766.5, an increase of 0.26%; the main contract of coking coal rose by 10.5, closing at 920, an increase of 1.15%; the main contract of coke rose by 16.5, closing at 1525, an increase of 1.09%.
Comprehensive view
After the rebound on the afternoon of July 14, the spot market saw another attempt to rise, but transactions were not optimistic. Currently, the market's acceptance of high-priced resources has decreased, and subsequent confidence boosting is needed. After the rounds of speculation last week, sentiment has shifted from active following to waiting for outcomes. If the speculation is proven false, a new round of risks may emerge along with the five major steel products data on Thursday. However, under the current rebound trend, we can remain cautiously optimistic, but it is not advisable to chase the rise. It is expected that spot prices will remain stable and slightly strong tomorrow, with a range of 0-20 yuan.
