Big News! Over 40 construction sites halt operations! Inventory increases to 2.28 million tons! Is the steel price drop not enough?

Great focus on the May import coal shipment by sea in our country, which reached 34.92 million tons, an increase of 6.86 million tons year-on-year, totaling 540 vessels. Among them, Indonesia coal shipment was 14.72 million tons; Australia coal shipment was 8.09 million tons; Russia coal shipment was

Special Focus

In May, China's coal imports via sea reached 34.92 million tons, an increase of 6.86 million tons year-on-year, totaling 540 vessels. Indonesia coal deliveries were 14.72 million tons; Australian coal deliveries were 8.09 million tons; Russian coal deliveries were 6.78 million tons.

The May Caixin China General Services Business Activity Index (服务业PMI) reached 54, up 1.5% from April, marking the highest level since August 2023 and staying above the boom-bust line for 17 consecutive months.

PART 01 Industry News and Analysis

01 Commodity index sees consecutive upward trends

In May, China's Commodity Price Index reached 118.9 points, up 3% month-on-month and marking a third consecutive monthly increase. This indicates a sustained recovery in corporate production and a rise in industry prosperity. By sector, the price indexes for non-ferrous metals, black metals, chemicals, and energy all rose month-on-month.

Analyst Perspective: Raw material costs rose month-on-month in May, and steel companies continued to experience losses. Entering June, domestic effective demand remains insufficient, with steel prices beginning to decline. Coupled with the off-season, high temperatures, and frequent rainfall, this further suppressed demand release, resulting in a pronounced seasonal weakening of steel prices.

02 42 cities implement shutdown policies

As the 2024 National College Entrance Examination and the Junior High School Entrance Examination are approaching, localities are issuing notices to strengthen the supervision of construction work. An incomplete count shows that as of June 4th, 42 cities have released new policies on halting construction at construction sites.

Analyst Perspective: Multiple regions have requested that construction sites refrain from noise-related activities except for emergency repairs during the college entrance examination period. This will provide a short-term significant suppression on steel demand. Coupled with the weak steel price performance before the Dragon Boat Festival, traders are exercising caution and observing cautiously, further pressuring steel transactions and negatively impacting the steel price trend.

03 Coal washing plant output hits a 5-month high

This week, the operational rate of 110 coal washing plants across the nation increased by 0.73% year-on-year to 69.55%, marking the highest in four months. The daily output rose by 0.81 million tons to 5.913 million tons, reaching a near five-month high.

Analyst Perspective: Inventory of raw coal increased by 4.69 million tons year-on-year to 22.824 million tons, with an increase of over 2%. Profitability for downstream coking enterprises remains decent, but steel mills show weak raw material procurement intentions, and there is an expectation of price adjustments. This puts pressure on the prices of coking coal and coke, which are expected to continue with a trend of weakness and volatility.

PART 02 Market Overview

Steel Mill Price Adjustment: Weak Operation

As of June 5th, according to the data from the Information Research Institute of China Iron and Steel Network (WeChat Official Account: China Iron and Steel Network), a total of 18 steel mills adjusted their prices today, including:

Increased by 1, accounting for 5%, with a price adjustment of 10 yuan/ton.

Reduced for 14, accounting for 78%, with a price adjustment of 10-50 yuan/ton.

Three companies are level, accounting for 17%.

PART 03 Futures & Billet Market Dynamics

On June 5th, the black series experienced a downward fluctuation. Rebar closed at 3,632 yuan, down 25 yuan; hot rolled coil closed at 3,781 yuan, down 13 yuan; coking coal closed at 1,652 yuan, down 16 yuan; coke closed at 2,237 yuan, down 22 yuan; iron ore closed at 825 yuan, down 15.5 yuan.

On June 5th, certain general billet resources in Qian'an, Tangshan, dropped by 10 yuan to 3430 yuan including tax for factory delivery.

June 5th, Slightly stable but weak (Zhonggangwang's large database) 

PART 04 Steel Price Forecast

The new policy in China has not brought about actual impact on steel demand; it is mainly a boost to market confidence. As the off-season deepens, steel prices continue to reflect a weak reality, with market destocking slowing down further. Transactions are generally weak, with significant price drops in some regions, and there are no signs of a price stabilization.Steel prices are expected to remain stable or slightly decline today.