Steel prices remain stagnant as the market awaits a breakthrough in macroeconomic conditions.

　　The current steel market stands at a critical crossroads. On one hand, steel prices have experienced a significant pullback, reaching their lowest levels of the year and generally hitting steelmakers' cost thresholds—creating a relatively secure bottom margin for the market. On the other hand, high inventory levels driven by sluggish demand continue to constrain the potential for steel prices to rebound. Meanwhile, the market is gradually entering a pivotal macroeconomic window, where the interplay between "weak realities" and "strong expectations" is once again intensifying. Under these circumstances, the direction and strength of macroeconomic policies will become the key variables determining how the current stalemate unfolds—and ultimately shaping the future trajectory of steel prices.

　　I. Steel prices have fallen back to the year's lowest level.

　　After a brief recovery in July, steel prices continued to fluctuate downward from August to October, hitting new lows and now approaching the levels seen earlier this year. Taking the Shanghai market as an example, as of October 20, 2025, the spot price of rebar had fallen by 5.8% compared to the beginning of the year, while the spot price of hot-rolled coil declined by 4.6%. Both figures remain within approximately 100 yuan/ton of their respective year-to-date lows. Currently, relatively low steel prices have provided the market with a favorable psychological safety margin, indicating that bearish factors associated with weak fundamentals have largely been priced into the market. As long as effective expectations management is maintained—and provided costs do not collapse—steel prices are unlikely to experience further sharp declines, even if macroeconomic conditions fall short of expectations in the future. More importantly, prices for finished black steel products have generally approached cost levels, leading to a rapid deterioration in steelmakers' profitability. Recent data show that the average loss per ton of billet at major national sample steel plants has reached 86 yuan, while electric furnace operations are currently operating at an average loss of -163 yuan/ton. Meanwhile, blast furnace rebar production continues to post an average profit margin of only -67 yuan/ton, and even hot-rolled coil production yields profits of around 50 yuan/ton. However, these current losses are insufficient to trigger widespread production cuts among steelmakers. Additionally, coking coal—a key raw material—has remained remarkably resilient recently, making it highly unlikely that it will significantly ease pricing pressure on steelmakers anytime soon. Against this backdrop, steelmakers may gradually strengthen their willingness to support prices amid downstream efforts to maintain stable pricing structures.

　　II. High Inventory Restrains the Room for Steel Prices to Rebound

　　Despite the contraction in steel mill profits, steel supply continues to remain at a high level. According to Mysteel's survey and estimates, steel mills will maintain their average daily molten iron production of 2.4 million tons in the short term. This trend is driven by several factors: steelmakers' efforts to preserve market share, safeguard employment, secure favorable bank credit support, and cope with the high costs associated with shutting down or restarting blast furnaces. Additionally, certain steel product categories still remain profitable, while molten iron tends to flow toward relatively more lucrative varieties. As a result, steel mills have shown limited willingness and ability to undertake large-scale production cuts. Meanwhile, overall demand remains sluggish. Although we are currently in the traditional peak season of "Golden October," the downward trajectory of the real estate sector persists, and domestic fixed investment has slowed somewhat. Insufficient project funding further contributes to weak domestic demand, resulting in an "off-season" scenario despite the traditionally strong period. Meanwhile, although steel exports continue to grow year-on-year, they have already begun to decelerate on a month-over-month basis. With rising tariff barriers overseas, it will become increasingly challenging for steel exports to sustain their current high growth levels. According to data from the General Administration of Customs, in September 2025, China's total steel billet exports amounted to 1.4936 million tons, representing a month-on-month decline of 15.34% but a significant year-on-year increase of 41.85%. Meanwhile, China's exports of steel plates reached 6.4 million tons, marking a year-on-year decrease of 6.1%. The direct consequence of this imbalance—strong supply and weak demand—is the ongoing accumulation of inventories. Inventories of products such as steel billets, hot-rolled coils, and strip steel continue to rise steadily, indicating that both domestic downstream consumption and export markets are struggling to absorb the current surge in supply. Moreover, high inventory levels mean that any rebound in prices could face substantial pressure from hedging activities and spot sales aimed at reducing excess stock.

　　III. Macro policies may become the key to breaking the deadlock

　　Although the fundamentals of the steel market currently remain under pressure, as the market enters a critical window for concentrated macroeconomic policy actions, the macroeconomic landscape will become the central driver shaping market trends during this phase. Looking ahead, there are three key expectations: First, with the upcoming domestic conference, the market anticipates more robust policies aimed at stabilizing growth, particularly in terms of fiscal measures and industry-specific initiatives to curb "involution" within sectors. Second, the Federal Reserve is set to hold its Federal Open Market Committee (FOMC) meeting on October 28–29 to decide whether to cut interest rates again. Despite the current "data vacuum" in the U.S., recent statements from Fed officials suggest that the market generally expects the Fed to further reduce its benchmark interest rate by 25 basis points. Meanwhile, the Fed's long-term plan to shrink its balance sheet may soon be nearing completion, opening up greater room for maneuver in its monetary policy stance. Finally, there is growing anticipation of a potential easing in Sino-U.S. trade relations. Notably, after concerns arose on October 10 when reports indicated that the U.S. might impose additional tariffs on certain Chinese goods—triggering widespread market anxiety—the renewed engagement between China and the U.S. has significantly bolstered expectations of improved trade dynamics. Moreover, a successful meeting between the two countries at the APEC summit to be held later this month in South Korea is widely seen as a pivotal moment, with the outcome likely to become the primary factor influencing asset pricing volatility during this period.

　　In summary, current steel prices have adjusted to relatively low levels. Although the fundamentals of the steel market continue to face downward pressure, there is limited room for further declines ahead of key macroeconomic events. As a result, steel prices are likely to remain in a weak and volatile trading range. At this stage, the market may experience some recovery and rebound when positive macroeconomic developments emerge—though the extent of such a rebound will depend on the overall performance of the macroeconomic environment. However, if macroeconomic conditions fail to meet expectations, risks associated with "weak realities" and "negative feedback loops" could once again dominate the market. In this scenario, steel prices may continue their downward trajectory, potentially testing even lower cost-support levels.