Post-holiday steel price correction is difficult

Since the start of January, the section steel market has been on a downward spiral, with prices falling consistently and showing no signs of recovery. Many traders expected a slight rebound after the holiday, but it seems that hope has turned into disappointment. In this bleak environment, what will happen to the profiled steel market? Will prices eventually reverse their decline, or will they continue to fall? Raw material billets have also struggled to recover from a prolonged downturn. The steel billet market started its descent in mid-December, and although January was expected to bring some improvement, the market continued to move against expectations. From 3,040 yuan/ton on December 30 to 2,820 yuan/ton now, that's a total drop of 220 yuan, with 160 yuan lost just in January. Compared to 3,280 yuan/ton in the same period last year, the decline is even more severe. In 2008, the steel market opened with a strong performance, but this year’s situation has left many investors feeling uneasy. As of January 23, the mainstream inventory of Tangshan billets stood at 666,000 tons, with 187,000 tons added during January. In comparison, in January 2013, the average inventory was around 431,000 to 104 million tons, with 610,000 tons added. The operating rate of rolling lines in billet mills has dropped to as low as 20–30%, signaling a significant slowdown in production. Despite the low inventory levels compared to previous years, prices remain under pressure. Why? One key factor is the reduced buying behavior from downstream mills, which are now purchasing only enough for about 10 days rather than 20. Previously, mills would stock up 5,000–13,000 tons for 3–4 days. At the same time, finished product prices have been declining due to weak demand, pushing steel mills to adopt aggressive selling strategies, often at lower prices. This “inverted trading” has become the norm. Another issue is tight capital flow. Steel mills and large customers are struggling with cash flow, making it hard for them to buy. Smaller merchants, who might otherwise be willing to purchase, are hesitant. Additionally, psychological factors play a role. With last year’s losses still fresh in their minds, many traders are cautious, fearing another downturn. As a result, even though February may see a slight rise, the rebound is likely to be limited. Tangshan’s billet prices are currently hovering between 2,830–2,870 yuan/ton. For example, the 5# angle bar fell from 3,260 yuan on January 1st to 3,140 yuan today—a drop of 120 yuan. In contrast, the same period last year saw an increase of 130 yuan. Similarly, the 10–14# slot in Lancang dropped from 3,370 to 3,190 yuan, a loss of 180 yuan. Wushao’s 5# angle bar also fell by 100 yuan to 3,270 yuan. Most large steel plants are still operating during the Spring Festival, while small ones have either shut down or are running at minimal capacity. According to Zhuochuang Information, factory inventories during the holiday could increase by 10,000–15,000 tons. Meanwhile, smaller factories that have stopped production maintain inventories between 7,000–16,000 tons, which is considered normal. The difficulty in price recovery stems from two main factors: first, despite relatively stable inventory levels, downstream operations are not yet fully active, leading to weaker demand. Second, funding constraints persist, with banks maintaining strict control over the steel industry. There’s a risk that some merchants may push for sales using low-cost funds. In summary, while the post-holiday price rebound is expected, it may take until late February or early March for any meaningful recovery, with an initial range of 50–100 yuan. As downstream sectors gradually resume operations, demand and prices may rise. However, both steel mills and traders are waiting for stronger signals before making bold moves. As the saying goes, "After a long decline, there must be a rise," but the market remains uncertain. The post-holiday "Jin San Yin Si" period did bring some optimism, but according to Zhuo Chuang Information, the market is unlikely to show significant upward movement before the 15th day of the lunar month. Merchants are advised to remain cautious in their buying and selling activities and stay alert to macroeconomic policies following the holiday.

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