Restocking or will boost steel prices
The steel market has experienced a rollercoaster ride in the fourth quarter, influenced by macroeconomic trends and inventory movements. After a weak start in early October, prices are expected to rebound, with potential for continued recovery leading up to the Spring Festival.
Starting in mid-August, steel prices saw a decline, which gradually affected raw material costs across the industrial chain. This downward trend was not aligned with positive macroeconomic indicators. In the third quarter, key economic data such as industrial output growth showed improvement, rising from 8.9% in June to 10.4% in August, while the manufacturing PMI rebounded to 51.1% in September. Despite this strong performance, steel prices failed to sustain gains, highlighting a growing disconnect between economic health and steel demand.
This mismatch has contributed significantly to overcapacity in the steel sector. A brief price rebound in July led to increased production, which later suppressed prices as supply outpaced demand. As we move into the fourth quarter, two major factors will shape steel price movements.
First, the macroeconomic outlook remains uncertain. While GDP and industrial output are expected to grow, they are unlikely to show strong momentum. With policy focus shifting toward reforms rather than aggressive investment, downstream demand is expected to remain sluggish. This lack of strong demand signals could weigh on steel prices in the near term.
Second, the traditional restocking season is approaching. Historically, steel inventories have seen a turning point in the fourth quarter, shifting from declines to increases. As northern steel traders begin restocking, this period typically becomes the strongest for steel prices of the year. Additionally, the relationship between iron ore imports and steel prices reinforces this trend—when iron ore inventories rise, prices tend to follow suit.
Although the weakening in investment continues to pressure steel prices, a shift in inventory dynamics in the latter part of the quarter may provide support. Therefore, after an initial dip, steel prices are expected to recover and maintain upward momentum through the end of the year, potentially reaching a peak around the Spring Festival.
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