Weak cost support, weak steel price continuation

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

Looking at the factors influencing steel production costs:

1. Raw Material Market: Last week, the raw material market remained sluggish, with steel mills showing little interest in buying at higher prices. As a result, prices declined slightly. Domestic iron ore prices fell, while imported ore continued its downward trend. Coke prices also weakened. As of May 16, the average price of domestic fine iron ore had dropped by 9 yuan/ton compared to the previous Friday, while imported ore fell by 13 yuan/ton. Metallurgical coke prices remained stable.

2. Shipping Market: In contrast, the shipping market showed some strength last week. As of May 16, freight rates for Brazil-China Capesize vessels decreased by $0.582/ton, while rates from Western Australia to China increased by $0.355/ton. The BCI index dropped by 12 points, while the BPI rose to 143 points. The BSI fell by 10 points, and the BDI increased by 30 points. It’s expected that the shipping market will remain relatively stable in the near term.

Meanwhile, steel prices continued to fall, with spot prices under pressure and market confidence weakening. Despite a short-term rebound following oversold conditions, demand remains weak. Macroeconomic data has not been encouraging, and the property sector continues to adjust rapidly. Steel mills remain optimistic about future demand, especially after a record high in crude steel production in early May. However, financial pressures are still present, and falling production costs are likely to keep steel prices under pressure this week. We anticipate that the weakness in steel prices may persist in the coming days.