The global steel industry is currently navigating a complex landscape shaped by a confluence of factors. Escalating international geopolitical conflicts, adjustments in trade policies by major economies, and the continued implementation of domestic stable-growth policies are all impacting the market. This has led to increased steel price volatility, presenting both new opportunities and challenges for enterprises across the industrial chain. This article provides a comprehensive analysis of the current development status and future trends in the steel industry, examining international dynamics, domestic policies, market supply and demand, and raw material trends.
I. Rising International Instability Elevates Uncertainty in Steel Supply Chains
Middle East Conflict Drives Up Energy Costs, Causes Sharp Fluctuations in Shipping Prices.The recent escalation of military conflict between the United States and Iran has heightened international concerns regarding the security of energy supplies from the Middle East. Brent crude oil futures surged 13% at the opening to $82 per barrel, while WTI crude futures rose over 10% to $75 per barrel. Spot gold and silver prices also saw significant increases. The sharp rise in energy costs has directly pushed up maritime freight rates for steelmaking raw materials like iron ore and coking coal. Although shipment volumes have not yet been significantly affected, market anxiety over potential supply chain disruptions is growing.
Concurrently, the United States has announced an increase in its global import tariff from 10% to 15% and is considering imposing a new round of tariffs on six industries, including large batteries and cast iron fittings. These actions could intensify global trade friction and impact the profit margins of Chinese steel exporters. However, China and South Korea have reached a price undertaking agreement regarding the anti-dumping case on hot-rolled steel plates. South Korea will implement a quota management system for Chinese hot-rolled steel coil imports, which temporarily alleviates some trade barrier pressures.
Fed Policy Direction and Manufacturing Recovery ExpectationsRecent US data shows the January Producer Price Index (PPI) rose 2.9% year-on-year, exceeding the expected 2.6%, with a month-on-month increase of 0.5%. Initial jobless claims fell to 212,000, indicating continued labor market resilience. Expectations for Federal Reserve interest rate hikes are intensifying, strengthening the US dollar index, which in turn puts pressure on dollar-denominated commodity prices. Nevertheless, market expectations surrounding US infrastructure plans and manufacturing reshoring continue to provide underlying support for long-term steel demand.
II. Domestic Policies Precisely Target Stable Growth Amidst Industrial Upgrading
PBOC Cuts RRR to Inject Liquidity, Strengthens Exchange Rate Risk Management.Effective March 2, the People’s Bank of China (PBOC) lowered the foreign exchange risk reserve requirement ratio for forward sales of foreign exchange from 20% to 0%. This move aims to reduce corporate costs for hedging exchange rate risks and enhance the competitiveness of foreign trade enterprises. It is expected to help stabilize expectations for the RMB exchange rate and provide a more favorable financial environment for steel exporters.
Accelerated Regional Economic Integration Unlocks Demand Potential.The Yangtze River Delta region’s economic output surpassed 34.66 trillion RMB in 2025, welcoming 10 new “trillion-yuan cities” and demonstrating significant synergistic development effects. New property policies in Shanghai have eased purchase restrictions, reducing the social security contribution period for non-registered residents to one year and increasing the housing provident fund loan limit to 3.24 million RMB. These policy dividends are expected to stimulate real estate investment, subsequently boosting demand for construction steel.
Continued Sino-US Economic Consultations with Flexible Countermeasures.A spokesperson for the Ministry of Commerce stated that China and the US maintain communication regarding the sixth round of economic and trade consultations. China will closely monitor US tariff adjustments and will take proportional measures in due course to protect its industrial interests. Currently, China’s tariffs on US fentanyl and related counter-tariffs are in a phase of dynamic adjustment and may be further optimized based on future international developments.
III. Intensifying Supply-Demand Dynamics in Steel Market: Inventory Pressure Coexists with Cost Support
Production Side: Blast Furnace Operating Rates Recover, EAF Restarts Slow.According to survey data, as of February 27, the operating rate of blast furnaces across 247 steel mills nationwide stood at 80.22%, a slight increase of 0.09 percentage points week-on-week. Average daily hot metal production reached 2.3328 million tons, a year-on-year increase of 53,400 tons. However, the operating rate of independent electric arc furnaces (EAFs) was only 28.26%, a sharp drop of 29.07% week-on-week, primarily due to tight scrap steel resources and high electricity costs.
Key Enterprise Developments:
1.Shanxi Gaoyi Iron & Steel plans to restart one blast furnace on March 1, adding 4,500 tons of hot metal daily.
2.Donghai Special Steel’s round bar production line is undergoing maintenance for repairs, reducing average daily output by 3,500 tons.
3.Zenith Steel is conducting maintenance on one blast furnace and its small bar line, with an expected production cut of 80,000 tons.
Demand Side: Apparent Consumption Declines Month-on-Month, Inventory Accumulation Exceeds Expectations.The apparent consumption of the five major steel products decreased by 10.9% month-on-week. Notably, consumption in the construction sector plummeted by 47.6%, while flat products consumption saw a minor decline of 0.3%. Total inventory increased to 18.4611 million tons, a week-on-week growth of 7.8%. End-user demand has not yet been fully realized, impacted by weather conditions and delayed capital availability.
Price Trends: Cost-Driven Rebound with Divergent Expectations.Despite weak demand, rising prices for raw materials like iron ore and coking coal have helped stabilize steel prices. As of February 27, the price of Tangshan billet was 3,920 RMB/ton, flat week-on-week. The average price for hot-rolled coil stood at 4,250 RMB/ton, up 1.2% from pre-holiday levels. Market sentiment is divided: one camp believes the approaching peak demand season, coupled with favorable policies, will drive steel prices higher; the other expresses concerns over inventory pressure and potential export tariff risks, leading to a short-term bearish outlook.
IV. Raw Material Market in Flux: Reshaping Industrial Chain Profits
Iron Ore: Ample Supply but Cost Pressures Persist.Global iron ore shipments increased by 5.984 million tons week-on-week, with shipments from Australia and Brazil recovering to 27.133 million tons. Inventory at 45 major Chinese ports grew to 171 million tons, while port off-take volume decreased by 527,100 tons. Although the fundamentals point towards a relatively loose supply-demand balance, expectations of rising shipping costs triggered by the Middle East conflict provide support for ore prices. The Platts IODEX index remains elevated, hovering around $125/ton.
Coke: Potential for First Price Cut, Cost Support Remains.Profitability among coking enterprises varies. Profit for Shanxi Grade I standard coke is estimated at 19 RMB/ton, while in Hebei it reaches 49 RMB/ton. Steel mills’ coke inventories are at reasonable levels, and environmental production restrictions are curbing demand. This increases the likelihood of a first-round price cut of 100-150 RMB/ton. However, the surge in international energy prices may delay the pace of coking coal price reductions, limiting the risk of a cost collapse.
Scrap Steel: Continuing Weak Supply and Demand Dynamics.Less than 50% of scrap steel processing bases have resumed operations, leading to low arrivals at steel mills. EAF plants in East China plan for a full-scale resumption by mid-March, which will concentrate scrap demand. In the short term, scrap steel prices are expected to remain stable, with the medium-term outlook dependent on the strength of the manufacturing recovery.
V.Risks and Opportunities Coexist, Policy Remains a Key Driver
Short-Term (1-2 months):
1.Positive Factors: Energy cost hikes from Middle East tensions, intensified domestic stable-growth policies, strong willingness among steel mills to support prices.
2.Negative Factors: Slow inventory digestion, uncertainty regarding export tariffs, slower-than-expected EAF restarts.
Medium-Term (3-6 months):
1.If the pace of Fed interest rate hikes slows, a global manufacturing recovery could boost steel demand.
2.The extent of domestic real estate policy relaxation and the implementation of infrastructure investment will be critical variables.
3.In the context of carbon neutrality, an increasing share of EAF steel production will reshape the industry landscape.
Operational Recommendations:
1.Steel Mills: Rationally control production pace and utilize futures instruments to hedge cost risks.
2.Traders: Monitor opportunities from regional price differentials and remain vigilant about inventory build-up risks.
3.Downstream Enterprises: Lock in raw material costs timely to guard against sharp price fluctuations.
The steel industry is currently in a phase of gaming between “strong expectations” and “weak reality.” The interplay of international geopolitical conflicts, domestic policy adjustments, and shifts in the profit transmission mechanism along the industrial chain is shaping a complex market environment. Enterprises must closely track policy developments and market signals, and flexibly adjust their operational strategies to seize opportunities amidst the changes.
Reprinted from steel.com
