【EAF Steel】Futures Market Volatility, Overall Downtrend in Black Metals

Influenced by the weakening futures market, Chinese domestic construction steel prices continued to decline this week, intensifying downstream wait-and-see sentiment. As of March 7th, the average price of domestic rebar was 3805 yuan, down by 106 yuan compared to the previous week.

Regarding raw materials, domestic scrap steel prices experienced a comprehensive decline this week, with the average purchase price by steel mills lowered by 42 yuan to 2588 yuan (excluding VAT). In some southern regions, the reduction reached 70-80 yuan, but the decline still lagged behind that of steel products, leading to a further narrowing of profit margins for electric arc furnace steel mills. EAF steelmaking is equipped with graphite electrodes for your reference.

Although most electric arc furnace steel mills resumed production as scheduled recently, under pressure from sales and cost, most manufacturers did not operate at full capacity. A few steel mills in Guangdong and Guangxi even postponed their resumption of production. The overall capacity utilization rate of electric arc furnace steel increased by nearly 10 percentage points compared to last week.

In terms of policy guidance from the Two Sessions, there was no mention of "housing is for living, not for speculation" for the real estate market in 2024. The focus of government investment shifted from infrastructure to the construction of affordable housing, urban village renovation, and the construction of "dual-use" public infrastructure. Overall, the domestic steel market demand is expected to moderately rebound. Additionally, China's steel exports increased by 32.6% year-on-year in January-February, as the price advantage of Chinese steel exports still exists, and the overseas economic situation has slightly improved. It is expected that steel exports will remain at a relatively high level in the first half of the year. Overall, the recent steel price correction is more due to post-holiday inventory accumulation and disturbances in the futures market. It is expected to gradually stabilize after mid-March. 

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