Volatile Back-and-Forth Trading in Off-Season; Demand Still Needed to Confirm Market Inflection Point
The billet market has entered a phase of choppy trading amid the traditional off-season recently, with prices oscillating at low levels without forming a sustained one-way trend. Price fluctuations are largely driven by industrial news and market sentiment: billet prices edge up when black commodity futures rally or news of tightened raw material supply spreads. However, downstream demand fails to keep pace, transaction volumes shrink rapidly at higher price levels to cap upside room, and prices quickly slip back into consolidation. As of press time, the ex-factory price of steel billets in Tangshan, the core market, stands at 2,940–2,950 yuan per metric ton, representing a cumulative gain of 20 yuan per ton compared with late July. Against the current market backdrop, when will the market hit an inflection point?
Supply & Demand
While both supply and demand have seen marginal month-on-month improvements, downward pressure from the off-season remains prominent.
On the supply side, sustained losses at steel mills and a shortage of export orders have kept billet output at moderately low levels.
On the demand side, sweltering heat and frequent rainfall have disrupted outdoor construction activity. Downstream re-rolling mills face sluggish finished steel sales and squeezed profit margins, adopting an on-demand purchasing strategy with little appetite for speculative bulk restocking. Temporary bargain-hunting buying only emerges at price lows, failing to drive sustained transaction growth. The supply-demand balance remains fundamentally weak. Looking ahead, as temperatures gradually drop, market participants have begun pricing in the traditional peak consumption season “Golden September & Silver October”, lifting expectations for pre-season restocking and creating room for marginal demand improvement. Nevertheless, slumping real estate performance and tight cash flow for end-users cannot be resolved in the short term, limiting the scope of supply-demand recovery. The upside potential of prices hinges entirely on the actual release of terminal demand.
Costs
Mixed bullish and bearish factors create only temporary, unstable cost support.
News of tight supply has lifted coal and coke prices in phases, boosting cost expectations and serving as the core driver of the current billet rebound. Most steel mills are currently operating at a loss, forming a certain floor under billet prices, yet cost pressure cannot sustain prolonged price gains. Raw material headlines will continue to roil futures markets, with coal and coke set to remain in choppy trading. Overall, costs can provide downside protection but lack the momentum to break through overhead resistance.
Market Sentiment
No major tangible positive macro policies have rolled out recently; trading activity revolves around seasonal expectations and industrial headlines, leaving manufacturers broadly cautious. Black metal futures swing with shifting sentiment, only lifting spot market mood temporarily without reversing the weak off-season fundamentals. The likelihood of unexpected supportive policies in the near term is low. Market sentiment is dominated by bets on the upcoming peak season, requiring continuous monitoring of macro policy developments.
Comprehensive Assessment
The market remains stuck in the demand off-season. High temperatures and heavy rains hamper construction progress, re-rolling mills suffer thin profits and adopt conservative purchasing approaches, with large-scale speculative restocking yet to materialize. Supply and demand have improved slightly month-on-month but only to a limited extent, and fundamentals do not back a sustained uptrend.
Once temperatures ease, the market may see a sentiment-driven corrective rally, which will merely be an off-season rebound rather than a full trend reversal. If terminal demand fails to meet market expectations, prices risk surging then collapsing. Investors should avoid blindly chasing price gains in trading operations.