The steel market exhibited relative stability today, with the previous downtrend easing and futures contracts closing slightly higher. By the close on the 30th, the rebar main October contract was at 3,088 points, up 1 point from the previous session. The hot-rolled coil main October contract settled at 3,315 points, a gain of 5 points. The coke main September contract finished at 1,958.5 points, up 1 point, while the coking coal main September contract ended at 1,280.5 points, rising 12.5 points. The iron ore main September contract closed at 747 points, an increase of 4.5 points. As of 4:00 PM on the 30th, the average spot price for rebar was 3,228 yuan per tonne, unchanged from the prior day. The average hot-rolled coil price was 3,317 yuan, down 3 yuan. On the raw materials front, the price for imported PB fines at Jingtang Port was 720 yuan, up 6 yuan. The price for first-grade metallurgical coke in Tangshan held steady at 1,830 yuan, and the ex-factory price for steel billet from leading mills in Qian'an, Tangshan, remained at 2,970 yuan.

Market Overview

The steel market operated with a generally stable tone today, though a few regional prices saw minor declines of around 10 yuan. Overall trading activity was moderate.

Following recent volatile sentiment in the coking coal market, major Shanxi mines have announced further increases in their July monthly railway contract prices, sustaining upward pressure on coal and coke costs. Prices for primary coking coal rose by 160-270 yuan per tonne, fat coal by 260-270 yuan, 1/3 coking coal by 180-270 yuan, lean coal by 230-250 yuan, meager lean coal by 230 yuan, and gas coal by 130 yuan. These are ex-plant cash prices including tax, effective from July 1st. While coking coal remains a key market focus, the fundamental supply-demand dynamics continue to drive the steel market, as reflected in the latest steel industry PMI data.

Examining the Data

The June PMI figures have been released. The national manufacturing PMI rebounded to 50.3, moving back into expansion territory, supported by a recovery among medium-sized manufacturers and a temporary boost in external demand from pre-emptive export shipments. However, the steel industry PMI painted a different picture, registering 47.8, a slight decrease of 0.1 percentage points from the previous month. This highlights the ongoing and intensifying pressure of the seasonal off-season, underscoring a structural divergence within the industrial sector.

The recovery in manufacturing is primarily driven by exports in electronics and AI-related semiconductors, coupled with a rush by companies to ship goods before new U.S. tariffs take effect at the end of July, creating a short-term "export rush" that has boosted new orders. Within the five sub-indices of the manufacturing PMI, both the production and new order indices were above the 50-point threshold, indicating some improvement in supply and demand. However, this positive momentum has not translated to the steel market. Overseas manufacturing recovery remains sluggish, with the new export orders sub-index for steel plunging by 1.8 percentage points month-on-month, showing no concurrent improvement in international steel demand. Domestically, the rainy season combined with widespread high temperatures has constrained construction activity, leading to a month-on-month decline in procurement by building materials end-users in many regions. Persistently weak new real estate starts continue to drag down demand for construction steel, keeping the industry's new orders sub-index in contraction territory at 46.3%.

On the supply side, while steel mills are proactively controlling output, the decline in demand is outpacing these cuts. The finished product inventory index surged by 9.9 percentage points, highlighting mounting stockpiling pressure. Raw material costs are showing mixed trends: coke price hikes are pushing up costs, while iron ore and scrap steel prices are weakening. Rigid inventory replenishment by mills led to a brief uptick in procurement volume, but purchasing sentiment remains cautious. With cost factors providing only a floor for prices, steel prices trended downward throughout June, completely dominated by weak seasonal demand.

Outlook and Key Considerations

The market continues to operate in a depressed state with limited trading opportunities. Steel prices are at relatively low levels for the year but lack any upward catalysts. The temporary boost from the manufacturing export rush is fading, while sustained hot weather continues to suppress construction activity. The persistent weakness in the property sector shows no clear signs of improvement, making a substantial recovery in steel demand unlikely. High inventories at mills, coupled with squeezed margins from raw material costs, are likely to lead to an expansion in maintenance and production cuts. Looking ahead, it will be crucial to monitor whether raw material demand weakens in response to mill output reductions, potentially leading to a correction from currently elevated price levels. For steel products themselves, the absence of demand drivers suggests prices will likely continue to fluctuate at low levels, with industry sentiment expected to remain under downward pressure.

Today, the broader ferrous commodities complex closed higher, with coking coal leading the gains, up 0.99% to settle at 1,280.5 points. Increases for coke, iron ore, rebar, and hot-rolled coil were very limited. The rebar main October contract settled at 3,088, up just 1 point. Open interest increased by 37,000 lots to 1.971 million, with some concentrated short-covering observed during the late-session price rebound. Trading volume reached 540,000 lots, 40,000 lots higher than the previous session. The day's trading remained weak overall, with the contract hitting a new intraday low of 3,076. The late-session increase in volume helped the price recover above the day's average cost basis for new positions, forming a basis for a short-term rebound. This move should be viewed as a minor technical bounce. The expected trading range for the next session is between 3,076 and 3,127 points.