What to expect from Chinese steel market post-CNY holidays?

There is consensus amongst the market participants that an adjustment will happen after the holiday. While there is no immense inventory pressure for rebar due to its low production, continued weak demand and seasonal resumption in EAF steel mills will slow down the rate of inventory drawdown. This could then lead to a price fall to induce production cuts.

Meanwhile, iron ore inventory at ports is building up due to a seasonal increase in arrivals.

Suppose hot metal production rises per seasonal patterns after the holiday (high likelihood), iron ore inventory will maintain a drawdown from March to July.

Steel production and demand are shifting toward flat steel which is produced according to orders/demand. Rebar fundamentals (inventory and margin pressure and whether there is a need to reduce production) can no longer determine the marginal change in hot metal production.

Suppose domestic demand and supply present downward pressure after the holiday; overseas demand will be the main upside risk.

Note: This article has been written in accordance with an article exchange agreement between Horizon Insights and BigMint.