Last week, steel mill profitability was only 36.36%, and inventories of the five major steel products decreased by 2.5%. The market is expected to continue its volatile trend.
I. Macroeconomic Environment: Weakening Overseas Economy Coexists with Domestic Policy Resilience
Signs of a global economic slowdown are strengthening, and expectations of a policy shift are rising.The US ISM Manufacturing PMI fell to 48.2 in November, remaining in contraction territory for the ninth consecutive month. US Treasury Secretary Bessenter predicted a 4% economic recovery in 2026, while White House officials signaled a possible interest rate cut by the Federal Reserve. In Europe, the Federation of German Industries warned that the economy is experiencing a “freefall” decline, lowering its industrial output forecast for this year to a 2% decline, pointing to structural difficulties in industry. The OECD slightly raised its 2025 economic growth forecast for China to 5%, becoming a bright spot in global growth forecasts.
Domestic policies focus on modernizing the industrial system and preventing risks. The National Development and Reform Commission and the State Council have both emphasized that building a modern industrial system will be a key task during the 15th Five-Year Plan period, clearly stating that optimizing traditional industries and cultivating emerging industries are equally important, and that new urbanization is seen as an important vehicle for expanding domestic demand. Financial supervision has been strengthened simultaneously. The People’s Bank of China has reiterated that virtual currency-related businesses are illegal financial activities and elaborated on the path to improving the monetary policy transmission mechanism from multiple dimensions. At the market level, the six major state-owned banks have completely stopped selling 5-year large-denomination certificates of deposit.
II. Core operating data of the steel market: Slowing production, continued losses, and inventory reduction.
Supply contracted under environmental constraints, and the blast furnace operating rate slightly decreased. Last week, the national blast furnace operating rate was 80.16%, a decrease of 0.93% compared to the previous week; the average daily pig iron output was 2.323 million tons, a decrease of 23,800 tons compared to the previous week. Affected by the activation of emergency responses to heavy pollution weather in Luoyang, Changsha, Handan, and other places, steel mill maintenance increased. Last week, a total of 25 production lines underwent maintenance, affecting output by 337,800 tons. The operating rate of independent electric arc furnace steel mills also dropped to 67.72%.
Steel mill profitability has not fundamentally improved, with over 60% of companies operating at a loss.Despite a slight decrease in raw material costs, weak steel prices have resulted in a still severe profitability situation. Last week, the average billet cost (including tax) for sample steel mills in Tangshan was 3071 yuan/ton. Based on the current billet price, steel mills are losing an average of 101 yuan/ton. The national steel mill profitability rate is only 36.36%, with 28.1% of independent electric arc furnace steel mills still operating at a loss.
Total inventory decreased, but apparent consumption weakened, exhibiting seasonal characteristics. Last week, the total inventory of five major steel products decreased to 13.6559 million tons, a week-on-week decrease of 352,200 tons, achieving destocking. However, weekly consumption decreased by 2.7% week-on-week, with construction material consumption decreasing by 5.8%, indicating that as temperatures drop, demand enters a seasonal off-season, and the inventory decrease is more due to supply-side contraction.
III. Product and Raw Material Market Analysis
Raw Material Market: Iron Ore Fluctuates, Coking Coal Prices Decrease, Scrap Steel Sees Localized Rebound，The iron ore market initially rose before falling. Global shipments remained stable, but demand weakened due to a decline in pig iron production, leaving the market caught between macroeconomic expectations and fundamentals. The coking coal market completed its first round of price reductions of 50-55 yuan/ton, weakening cost support and prompting cautious steel mill purchases, suggesting a weak short-term trend. The scrap steel market saw localized price rebounds due to tight resources, but constrained by steel mill profits, it is expected to remain volatile.
Major Finished Steel Products: Rebar and Hot-Rolled Coil Fluctuate, Strip Steel Shows Relatively Strong Performance
The rebar market exhibited regional differentiation. Demand in the north was waning, while the south showed resilience, with prices initially rising before stabilizing, and a continued volatile pattern is expected. The hot-rolled coil market initially rose before falling, but the rebound lacked sustained momentum, leading to an accumulation of social inventory, and short-term range-bound trading is expected. The strip steel market showed a slightly stronger trend driven by the macroeconomic environment, but increased national inventory and accumulated supply-demand imbalances may limit the sustainability of price increases.
IV. Market Outlook for This Week: Macroeconomic and Fundamental Factors in Play, Volatility Remains the Main Theme
The current steel market presents a complex situation of “high operating rates, high losses, and low inventory.” Global manufacturing activity contraction is constraining overall commodity sentiment, while domestic policy expectations and winter environmental production restrictions provide bottom support. From a fundamental perspective, demand is entering the traditional off-season, but supply is actively contracting due to losses and environmental pressures, leading to inventory reduction and alleviating some pressure.
It is expected that ahead of the important macroeconomic meeting, the market lacks a clear unilateral driving logic. Prices of various commodities will continue to be subject to the interplay between macroeconomic expectations and industry fundamentals, maintaining an overall range-bound trading pattern with relatively limited upside and downside potential. The market will need to closely monitor policy implementation, raw material cost changes, and the actual enforcement of winter production restrictions.
Note: Reprinted from Steel.com
