Weak cost support, weak steel price continuation

Last week saw a continued decline in domestic steel production costs, adding pressure to already weak steel prices. According to the latest cost model as of May 16, the cost of carbon billet dropped to 3,046 yuan/ton, while the cost of third-grade rebar fell to 3,475 yuan/ton. The cost of ordinary carbon plate was at 3,461 yuan/ton, and high-line steel stood at 3,400 yuan/ton. Hot rolled coil (3.0mm) cost 3,512 yuan/ton, and cold rolled sheet (1.0mm) came in at 3,875 yuan/ton. Compared to the previous Friday, these costs decreased by approximately 18–19 yuan/ton, or 0.47% to 0.60%.

Looking at the factors influencing steel production costs:

First, the raw material market remained soft. Steel mills were more inclined to lower prices due to weak demand, leading to modest declines in key inputs. Domestic iron ore fines softened, while imported ore continued to trend downward. Coke prices remained stable. As of May 16, the average price of domestic fine iron ore had fallen by 9 yuan/ton from the previous week, and imported ore declined by 13 yuan/ton. Metallurgical coke prices held steady.

On the shipping front, the market showed some strength last week. Freight rates for Brazil-to-China Capesize vessels dropped by $0.582/ton, while rates from Western Australia to China rose by $0.355/ton. The BCI index fell by 12 points, while the BPI increased to 143 points. The BSI dropped by 10 points, and the BDI climbed by 30 points. Market participants expect the shipping sector to remain consolidated in the short term.

Meanwhile, the spot market experienced sharp declines, with weaker confidence among traders. Despite a brief rebound after oversold conditions, the market still lacked momentum. Macroeconomic data remained underwhelming, and the property sector continued its adjustment. Steel mills, however, remain cautiously optimistic about future demand. In early May, crude steel production hit a new high, but financial pressures resurfaced toward the end of the month. With production costs continuing to fall, we anticipate that steel prices will likely remain weak this week.