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Chuangcai’s Interpretation: The Fed’s Future Policy Direction Still Holds Uncertainty—A Brief Analysis of “Interest Rate Cuts, Balance Sheet Reduction, and a Stable U.S. Dollar”

03

26-02

// Blog

Chuangcai’s Interpretation: The Fed’s Future Policy Direction Still Holds Uncertainty—A Brief Analysis of “Interest Rate Cuts, Balance Sheet Reduction, and a Stable U.S. Dollar”

[Key Takeaway] Previously, U.S. President Trump indicated that he was not concerned about the depreciation of the U.S. dollar, triggering noticeable weakening in U.S. stocks, bonds, and the currency itself. Market expectations for a weaker dollar intensified, causing gold prices to rise rapidly. Subsequently, Bessen reiterated the U.S. dollar’s strong-strategy stance, aiming to stabilize market expectations. At the same time, he announced the nomination for the next Fed chair, prompting the market briefly to enter “Wash” trading—characterized by a policy orientation favoring “rate cuts plus balance-sheet reduction.” As a result, the U.S. dollar index rebounded from its bottom, while gold prices experienced a sharp decline. We believe that, given the current U.S. economic situation—which carries the risk of stagflation—and the previous sustained weakening of the U.S. dollar, this nomination could, in the short term, improve market expectations regarding the dollar’s creditworthiness. Specifically, by introducing the concept of balance-sheet reduction in the near term, the market may engage in expectation-driven trading aimed at stabilizing the dollar and dollar-denominated assets on a temporary basis. Going forward, it will be crucial to closely monitor whether the U.S. dollar index can stabilize under the new policy guidance from the Federal Reserve, whether market preference for dollar-denominated assets increases to some extent, and whether this can help bolster expectations of a soft landing for the U.S. economy. Overall, the global trend toward de-dollarization remains unchanged. The declining credibility of the U.S. dollar and the fiscal sustainability challenges posed by U.S. Treasury bonds persist. We expect that during Trump’s term, the U.S. dollar index will continue to remain relatively low in the medium to long term. Looking ahead, we anticipate that the Fed will keep the door open for further rate cuts. Under Trump’s weak-dollar strategy, the overall upward trend in gold prices is likely to remain intact for now. In the future, balance-sheet reduction may serve as a non-sustained tactical measure, and the actual probability of implementing such a reduction is relatively low. At the same time, we should also pay close attention to the final nomination of the next Fed chair. Should there be any changes in this nomination, market trading dynamics and asset prices could undergo significant shifts.

The global precious metals market plunges; China’s Hubei steel mills conduct winter stockpiling surveys.

02

26-02

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The global precious metals market plunges; China’s Hubei steel mills conduct winter stockpiling surveys.

◎ U.S. President Trump has formally nominated Kevin Warsh, a former Federal Reserve Board governor, as the next Fed chair to succeed Powell, whose term will end in May. Warsh’s nomination for Fed chair has sparked hawkish expectations. Coupled with profit-taking and short-covering by short-term futures traders, international precious metal prices plunged to record lows last Friday. ◎ On February 1, local time, at Mar-a-Lago, U.S. President Trump, responding to reporters’ questions about Iran, said he hoped “an agreement could be reached.” Earlier that day, Iranian Foreign Minister Araghchi stated that Iran remained “confident” about reaching an agreement with the United States on nuclear issues. He said that information exchanges through friendly regional countries were facilitating contacts between the two sides and described the ongoing negotiations as “productive.” ◎ On February 2, spot silver continued its downward trend, with intraday losses widening to 10%; spot gold fell below $4,700 per ounce, dropping more than 3% within the day. ◎ A survey of winter steel stockpiles conducted by Hubei’s construction steel mills showed that, regarding price-locking policies, the leading price for construction steel in the Wuhan area is around 3,150 yuan per ton, and the scale of price-locking policies introduced has decreased. ◎ On the afternoon of January 30, the Political Bureau of the CPC Central Committee held its 24th collective study session on proactively planning and developing future industries. During the study session, Xi Jinping, General Secretary of the CPC Central Committee, emphasized that we must adopt a strategic perspective, standing at the height of advancing the cause of building a strong country and national rejuvenation, based on objective conditions, leveraging our comparative advantages, adhering to the principle of seeking progress while maintaining stability and fostering development in a graded manner, and continuously achieving new breakthroughs in the development of China’s future industries.

Chuangcai Latest News: Supply Increase and Demand Decrease for China's Five Major Steel Products, Chief Outlook on February Steel Prices

30

26-01

// Blog

Chuangcai Latest News: Supply Increase and Demand Decrease for China's Five Major Steel Products, Chief Outlook on February Steel Prices

1. The U.S. Trade Representative recently told reporters in Davos that before a possible China-U.S. leaders' meeting in April, both sides have the opportunity to start a new round of economic and trade negotiations. The Ministry of Commerce responded that China is willing to make good use of the China-U.S. economic and trade consultation mechanism to manage differences and promote cooperation. 2. Wang Jianhua, chief analyst of Shanghai Ganglian Steel, expects that in February, the steel market will see the gradual end of steel mills' raw material replenishment before the Spring Festival. The sales of finished steel products during and around the holiday will be sluggish with continuous inventory accumulation. Prices of ordinary steel will continue to fluctuate, while prices of stainless steel and others will rebound. 3. Chuangcai surveyed the Spring Festival shutdown situation of 95 independent electric arc furnace steel mills, mostly concentrated in February. The largest number of shutdowns, 44 mills accounting for 47.83%, occurred from February 1 to February 8, nearly half. The remaining 9 mills will shut down successively after February 8, with the latest shutdown on February 15. 4. This week, the supply of China's five major steel products was 8.2317 million tons, an increase of 35,800 tons or 0.4% week-on-week; total inventory was 12.7851 million tons, up 214,300 tons or 1.7% week-on-week; weekly apparent consumption was 8.0174 million tons, down 1.0% week-on-week.

China Iron and Steel Association: Production Status of Plate and Strip Products from Key Statistical Enterprises as of December 2025

28

26-01

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China Iron and Steel Association: Production Status of Plate and Strip Products from Key Statistical Enterprises as of December 2025

China Iron and Steel Association: Production Status of Plate and Strip Products from Key Statistical Enterprises as of December 2025，In December, key statistical enterprises Medium- and thick-plate Rolling mill output rose year-on-year, while output from hot continuous rolling mills and cold continuous rolling mills declined year-on-year. Among these, the medium- and thick-plate rolling mills produced 6.05 million tons, an increase of 190,000 tons, or 3.2% over the same period last year; cumulative production reached 76.3 million tons, up 2.97 million tons, or 4.1% year-on-year. In December, hot continuous rolling mills produced 15.15 million tons, a decrease of 1.27 million tons, or 7.7% year-on-year; cumulative production for the year totaled 191.92 million tons, unchanged from the previous year.

ChuangCai Consulting: Global crude steel production is projected to reach 1849 million tons in 2025, with a general rise in international commodity prices.

26

26-01

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ChuangCai Consulting: Global crude steel production is projected to reach 1849 million tons in 2025, with a general rise in international commodity prices.

ChuangCai Consulting: Global crude steel production is projected to reach 1.849 billion tons in 2025, with a general rise in international commodity prices. ◎ According to data from the China Iron and Steel Association, as of mid-January, the average daily crude steel output of key steel enterprises was 1.979 million tons, down 0.9% from the previous period. Steel inventory stood at 16.13 million tons, up 7.3% from the previous ten-day period and up 0.8% from the same period last month. ◎ According to the World Steel Association, global crude steel production in December 2025, covering 70 countries and regions included in the World Steel Association’s statistics, totaled 139.6 million tons, down 3.7% year-on-year. For the full year 2025, global crude steel production is forecast at 1.8494 billion tons. ◎ From January 19 to January 23, the national average price of rebar was 3,321 yuan per ton, down 0.90% week-on-week. On the supply side, weekly rebar production reached 1.9955 million tons, up 4.86% from the previous week; inventory stood at 4.521 million tons, up 3.2% from the previous week. On the demand side, consumption totaled 1.8552 million tons, down 2.53% from the previous week. ◎ On January 23, local time, the Office of Foreign Assets Control of the U.S. Department of the Treasury announced a new round of sanctions targeting several entities and vessels linked to Iran’s energy and shipping systems, with a particular focus on shipping and management networks that assist Iran’s exports of oil, energy, and related derivatives.

What structural changes will occur in China’s steel demand in 2026?

23

26-01

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What structural changes will occur in China’s steel demand in 2026?

At the recently held 2025-2026 China Economic Annual Conference, China made intensive policy arrangements—including “promoting synchronized growth of residents’ incomes and economic growth,” “expanding imports and exports,” “optimizing the ‘two new’ policies,” and “leading the transformation through the ‘dual carbon’ goals”—which have injected multi-dimensional momentum into the demand side of the steel industry. Against the backdrop of the "Work Plan for Steady Growth in the Steel Industry (2025-2026)," which sets an annual average target of 4% growth in the industry’s value-added, this comprehensive policy mix will drive the steel demand from “traditional reliance” toward “diversified drivers,” achieving a dual breakthrough: stabilizing overall demand volume while upgrading its structural composition.

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