Market Overview

July witnessed a sustained rally in Chinese steel prices, with Shanghai Φ20 rebar soaring from 3,150 to 3,440 RMB/ton. Seamless pipe prices followed this upward trend with a lag, driven by macro catalysts:

• Policy stimulus: The State Council's July 16 meeting emphasizing "anti-internalization" and industrial restructuring ignited futures markets.

• Mega-project boost: The launch of the Yarlung Tsangpo hydropower project (July 20) amplified bullish sentiment.

• Cost push: Coking coal/coke prices surged, forcing mills to raise offers; Shandong billets rose 190 RMB/t before a 20 RMB/t end-month correction.

Core Market Dynamics

1. Cost-Price Transmission Mechanism

• Raw material squeeze: Shandong billets peaked at 3,410 RMB/ton (July), pushing pipe mills to hike finished product prices.

• Profit paradox: Mills regained profitability (Shandong: 60 RMB/t), but regional divergence intensified—Jiangsu mills secured 260 RMB/t profit due to cost advantages.

• Vulnerability: Iron ore volatility (+27 RMB/t MoM) and coking coal shortages threaten fragile margins.

2. Supply-Demand Rebalancing

• Inventory shift:

1. Mill stocks fell 20.7k tons WoW (July-end) as traders restocked.

2. Social inventories rose to 695.4k tons (+0.55k tons), signaling cautious channel filling

• Tepid demand: July transactions averaged 15.7k t/day (+6% MoM), but August typhoons suppressed regional consumption (e.g., South China sales ↓18.6%)

3. Macro-Policy Amplified Volatility

• Supply constraints: Tangshan ordered independent mills to halt production (Aug 25-Sep 3) for the military parade, potentially cutting output by 9k t/day94.

• Trade relief: China-US tariff suspension (24% duties paused for 90 days) eased export pressure.

August Outlook: Critical Watchpoints

• Early-month pressure: High temperatures and floods constrain construction; inventory digestion dominates.

• Late-month catalysts:

• Demand seasonality: Post-monsoon infrastructure acceleration (notably post-Aug 20).

• Supply shock: Northern production halts may tighten markets by early September.

• Price trajectory: Expect 4,330-4,450 RMB/t range—cost floor vs. demand ceiling.