January Steel Market—Pre-Holiday Weak Realities Weigh Down Prices; Black-Steel Sector Awaits “Spring Surge”

This article is a condensed version of Mysteel’s “Monthly Insights” provided by the Key Account Service Department. The original article was published last Saturday (December 27).

In December, prices of black-series commodities exhibited a pattern of “initial decline followed by rebound, with weak recovery.” In the first half of the month, key macroeconomic events—including the Central Political Bureau meeting, the Central Economic Work Conference, and the Federal Reserve’s interest-rate cut—were all held as scheduled. However, the policy tone and measures adopted were largely in line with market expectations and failed to provide additional upward momentum. Meanwhile, demand for the five major steel products accelerated its downward trend; the nation’s average daily pig-iron output fell from 2.34 million tons at the end of November to 2.26 million tons by year-end, and the easing of raw-material cost support further weighed on steel prices. As the second half of the month began, with the supply pressure on the five major steel products significantly easing and demand unexpectedly robust, total inventories continued their rapid destocking. From a lunar calendar perspective, compared to the week before the holiday (the 11th week), total inventories of the five major steel products fell cumulatively by 10.2% during the seventh week before the holiday—the fastest destocking pace for the same period in nearly four years (the historically fastest pace was around 6.4%). At the same time as supply and demand showed temporary improvements, domestic policymakers once again emphasized “expanding domestic demand,” and local governments expressed positive views on the inaugural year of the 15th Five-Year Plan. These developments boosted market sentiment and helped drive the stabilization and rebound of black-series commodity prices.

During the weak recovery phase in the black commodity sector, performance among different varieties has shown some divergence. On the raw materials side, conditions remain generally weak: while disruptions on the coking coal supply side have eased, total inventories have begun to build up steadily, and coking coal prices have fallen for the third consecutive round of reductions. By contrast, iron ore prices have remained relatively firm, supported by structural imbalances; the average monthly price of PB fines at Qingdao Port rose slightly by 0.1% month-on-month. On the finished products side, the trend has been one of "strong rebar, weak hot-rolled coils": the average monthly spot price of rebar in Shanghai rose by 2.4% month-on-month, whereas hot-rolled coil prices fell by 0.2% month-on-month. Although supplies of both rebar and hot-rolled coils have contracted sharply, year-end construction rushes have been particularly concentrated in southern and eastern China regions. As a result, weekly average rebar inventories have declined by about 240,000 tons—a pace notably faster than in recent years during the same period. In contrast, consumption of hot-rolled coils has continued to weaken, with apparent demand remaining persistently at its lowest level in nearly three years. Coupled with growing concerns over export resilience triggered by new regulations governing steel export licenses, prices have come under even greater downward pressure, significantly dragging down the overall valuation recovery of finished steel products.

Looking ahead to January of next year, steel prices are likely to follow a pattern of “initial decline followed by a rebound,” though the overall range of fluctuations is expected to remain limited. The price center will probably hover narrowly around the cost line.

From a fundamental perspective, the average daily pig iron production this period has bottomed out and slightly rebounded to 2.266 million tons. According to earlier data from Mysteel, pig iron output is likely to gradually rise to around 2.3 million tons in the coming period, implying that supply pressure on finished steel products will marginally increase. However, the downturn in demand has yet to come to an end—especially after the rush of work at year-end concludes, the apparent demand for rebar may accelerate its decline. As a result, the supply-demand imbalance for the five major steel products will gradually widen, and the turning point for inventory accumulation is approaching, leaving short-term steel prices lacking upward momentum.

Moreover, mounting export pressure is also a key factor restraining January prices. According to Mysteel’s survey, China’s hot-rolled coil export orders have recently continued to slow down, with sluggish market transactions and widespread wait-and-see sentiment. Underlying this trend are both weak overseas demand and relatively high domestic export quotes, compounded by expectations of adjustments to export policies and the strengthening of the RMB exchange rate. Currently, mainstream hot-rolled coil FOB quotes are concentrated in the range of US$460–475 per ton, but acceptance in overseas markets remains limited, resulting in few actual transactions. Meanwhile, overseas market prices—in countries such as South Korea—have been steadily declining since mid-month, narrowing the price gap between China and South Korea to just US$56 per ton, significantly lower than this year’s average of US$67 per ton, thereby weakening China’s price advantage for exports. In addition, overseas buyers, concerned about policy uncertainties, generally prefer to wait until the new policies take effect in January before making decisions, leading to a decline in their willingness to place new orders in the short term and diminishing the role of exports in providing support to demand.

Although rising fundamental pressures and weakening exports may pose a risk of a short-term pullback, this is something that has typically occurred in the first quarter of each year.

Currently, localities are actively preparing investment projects for next year, striving to achieve a strong start in the inaugural year of the 15th Five-Year Plan. Given that next year’s Spring Festival falls relatively late, the effective construction window for securing a “good start” is relatively tight. It is therefore possible that some projects may be launched ahead of schedule and the pace of special bond issuance could be accelerated. According to the disclosed special bond issuance plan for the first quarter of 2026 (as of December 22), the planned issuance volume of new special bonds nationwide for January next year will reach 122.6 billion yuan, while the planned issuance volume of refinancing special bonds will amount to 296.3 billion yuan. Moreover, provinces and cities such as Guangdong, Shandong, and Hunan—those that have adopted an “independent review and issuance” approach—still have room to further increase their issuance volumes, signaling that the support for infrastructure funding in the first quarter of next year will remain robust. Meanwhile, data from the National Bureau of Statistics show that China’s excavator production in November reached its highest level since March 2023, with the monthly increase driven primarily by domestic demand. This improvement in this leading indicator suggests that end-demand in the first quarter of next year will demonstrate considerable resilience, and physical work volume is expected to accelerate its implementation.

Moreover, as hot metal production recovers, steel mills’ rigid demand for replenishing raw material inventories remains strong in January. Currently, steel mills’ imported ore inventory can last only 31.6 days, still about 2.4 days lower than the same period last year and at a relatively low level compared to previous years, leaving considerable room for inventory replenishment. Meanwhile, steel mills’ coking coal inventory days still have about two more days of room to rise before reaching the peak levels seen around the Spring Festival over the past two years. Given the relatively significant improvement in steel mills’ profit margins compared to coke enterprises, the window for coking coal prices to stop falling and start rising is drawing nearer. As a result, January has the foundational conditions to see a round of price increases, and the upward pressure on costs will also provide effective support for finished product prices.

Thread Steel: In December, thread steel prices exhibited a “first decline followed by a rise” trend. The average monthly spot price of Shanghai thread steel rose 2.4% month-on-month to 3,291 yuan per ton, outpacing the price increases of other black-series products. The key support behind this trend was the off-season destocking of inventories: Monthly thread steel production fell by 10.7% from the previous month, a decline that exceeded the 7% drop in apparent demand, driving a monthly average weekly reduction of about 240,000 tons in total thread steel inventories—a destocking rate significantly faster than in recent years for the same period. In some regions, certain specifications became relatively tight, leading to relatively firm spot prices and keeping the thread steel basis at levels near the highest points seen over the past three years for the same period.

Although downstream demand in December faced seasonal downward pressure, concentrated rush work in parts of southern and eastern China at year-end provided some resilience. As a result, monthly average rebar apparent demand fell by 7% month-on-month—significantly less than the approximately 13% decline seen in the same period in both 2023 and 2022. Entering January, downward pressure on rebar demand will intensify markedly, with monthly average apparent demand expected to fall by 16% month-on-month to 1.744 million tons. This is primarily constrained by three factors: First, nationwide cooling temperatures are imposing systemic restrictions on outdoor construction activities; second, environmental regulations in some regions are becoming stricter, and coupled with the fact that most existing projects are already in the final stages, construction pace has slowed down; third, overall participation in winter stockpiling in the current market remains relatively low, thus providing limited support to demand.

From the supply side, in mid-to-late December, steel mills in some regions carried out concentrated production cuts and maintenance, causing rebar output to rapidly decline from 2.081 million tons at the end of last month to 1.788 million tons, significantly easing supply pressure. Although the three rounds of coke price reductions have continued to improve steel mill profits, amid weak demand expectations during the off-season and the absence of unexpectedly strong real estate support policies at the upcoming key meetings, steel mills have generally adopted a cautious approach toward resuming production. As a result, rebar output in the second half of the month only saw a modest rebound, reaching 1.844 million tons. Looking ahead to January, as profits continue to recover, some long-process steel mills are showing increased willingness to resume production. According to Mysteel’s survey, as of December 26, blast furnace profits for rebar stood at around 50 yuan per ton, while electric arc furnace profits from using off-peak electricity were approximately 100 yuan per ton, with profits from using flat-rate electricity hovering near the breakeven point. Meanwhile, current rebar inventories at steel mills have yet to show signs of sustained, substantial accumulation. It is expected that January’s average monthly rebar output will rise by 4.8% from the previous month to 1.923 million tons.

Overall, in January, the fundamental supply-and-demand dynamics for rebar are set to shift toward "increased supply and declining demand." The turning point for inventory accumulation is expected to occur in the mid-to-late part of January (the fourth week before the Spring Festival). By the end of the month, total inventories could rise to around 5.2 million tons. This supply-demand mismatch may put downward pressure on rebar prices, triggering a temporary correction.

However, it’s important to note that the underlying logic of winter stockpiling remains a game between expectations and prices. Although the market generally believes that this year’s atmosphere for steel product winter stockpiling is relatively subdued, next year—the inaugural year of the 14th Five-Year Plan—could see a concentrated release of market expectations regarding post-holiday resumption of production and recovery in demand. Meanwhile, given that the Spring Festival falls later this year, the effective construction window will be relatively compressed, leaving open the possibility that some projects may start ahead of schedule and that the pace of special bond issuance could be brought forward. According to data from the National Bureau of Statistics, the increase in excavator sales in November was driven primarily by domestic demand. This marginal improvement in the leading indicator suggests that end-user demand in the first quarter of next year will demonstrate a certain degree of resilience, and physical work volume is expected to accelerate its implementation. Against the backdrop of still-optimistic expectations, if prices fall back into a relatively reasonable range, there could still be a temporary surge in restocking and speculative demand, providing some support for prices.

Hot-rolled steel: In December, the market price of hot-rolled steel exhibited a “V-shaped” fluctuation, with an overall trend initially declining and then rebounding. The average spot price in Shanghai for the month was 3,276 yuan per ton, down slightly by 4 yuan per ton compared to the previous month.

The simultaneous contraction of both supply and demand in the market was the primary feature of December’s performance. Affected by tight funding conditions at construction sites at year-end, steel demand from the machinery industry showed a seasonal decline, leading to a drop in market orders. Meanwhile, hot-rolled coil production has been operating at a loss for a consecutive month, prompting many steel mills to schedule their annual maintenance activities in a concentrated manner. Under this scenario of weak supply and demand, the pace of destocking total hot-rolled coil inventories significantly accelerated: in December, the destocking rate for a small sample of hot-rolled coil inventories rose by 4.5 percentage points from November to 6%, marking the fastest pace in the second half of the year.

Looking ahead to January, the hot-rolled steel market is expected to shift toward a fundamental pattern of stable demand and rising supply, with supply-demand imbalances likely to accumulate gradually. This will be reflected in the following two aspects:

1.

In December, the weekly average output of hot-rolled steel fell to 3.021 million tons, a decrease of 146,000 tons from the previous week, reaching the lowest level of the year. This decline was mainly driven by continued production losses and weak downstream orders, prompting some steel mills to concentrate their annual maintenance activities. According to Mysteel’s survey, steel mills scheduled for maintenance from late November to early December will gradually resume production starting in January. As a result, the weekly average output of hot-rolled steel is expected to rebound to 3.117 million tons, an increase of 96,000 tons from the previous week.

2.

This week, the average weekly apparent demand for hot-rolled steel coils stood at 3.08 million tons, down by 100,000 tons from the previous week. Entering January, demand is expected to remain subdued, with weakening exports being the key constraint: Recently, China’s orders for hot-rolled steel coil exports have continued to slow down, and market sentiment remains cautious. This trend is influenced both by weak overseas demand and relatively high domestic prices, as well as by expectations of adjustments to export policies and a strengthening RMB exchange rate. Currently, mainstream FOB quotes for hot-rolled steel coils range from US$460 to US$475 per ton, but overseas acceptance remains limited, resulting in light actual transaction volumes. Meanwhile, prices in markets such as South Korea have been declining steadily since mid-month, narrowing the price gap between China and South Korea to just US$56 per ton—lower than the year-to-date average of US$67 per ton—thus diminishing China’s price advantage. In addition, overseas buyers are largely waiting for clearer policy signals in January before making decisions, leading to a decline in short-term willingness to place new orders and significantly reducing the role of exports in underpinning demand. Consequently, the average weekly apparent demand for January is expected to stay around 3.08 million tons, continuing its weak performance.

In summary, at the start of 2026, the hot-rolled steel market will continue to exhibit a weak supply-demand dynamic. However, as production recovers, inventory pressure is expected to gradually become more pronounced. According to our balance-sheet projections, by the end of January, total inventories of hot-rolled steel in a small sample group will shift from declining to rising, accumulating by 185,000 tons—a cumulative increase rate of approximately 4.9%. Against the backdrop of steadily mounting supply-demand imbalances, the price center of gravity for hot-rolled steel is expected to continue moving downward.

It’s worth noting that the “spring rally”—a typical phenomenon observed in the first quarter of each year—could once again become the main trading theme in the market. In particular, as 2026 marks the inaugural year of the 15th Five-Year Plan, market expectations for resumed production and a rebound in demand following the holiday period may be even stronger. Supported by these expectations, hot-rolled steel prices are likely to continue fluctuating narrowly around their current central range, with a relatively low probability of breaking downward.

Iron Ore: In December, the price trend of PB fines at Qingdao Port* showed a U-shaped bottom pattern, with an average monthly price of 789 yuan per ton—a slight increase of 2 yuan compared to the previous month. Nationwide daily hot metal production fell from 2.34 million tons at the end of November to 2.26 million tons by year-end. At the same time, port inventories accumulated to 71.8 million tons, indicating an overall bearish outlook for iron ore fundamentals. However, steel demand unexpectedly remained robust, and following the Federal Reserve’s expected interest-rate cut and the Central Economic Work Conference, China has successively expressed its determination to expand domestic demand and achieve a strong start to the 14th Five-Year Plan, driving prices higher.

As the blast furnaces that underwent earlier maintenance are gradually resuming production, pig iron output has begun to show signs of bottoming out and rebounding. However, downstream demand remains in a seasonally declining phase, possibly dragged down by falling steel prices. Nevertheless, given the bottoming-out and rebounding trend in pig iron production, coupled with the fact that current steel mills’ inventories of imported iron ore are at historically low levels, there is considerable room for restocking, suggesting that iron ore prices will outperform steel prices.

Moreover, in the run-up to the Spring Festival each year, the market invariably revolves around speculations about post-festival demand. This year, given that the Lunar New Year falls later than usual, localities will need to ensure strong economic performance in the first quarter. As a result, project investments will be accelerated ahead of schedule, leading to stronger-than-usual data for January and February.

In summary, it is expected that mining prices in January will generally follow a trend of first declining and then rising.

Dual Focus: In December, prices followed a V-shaped trend. Earlier in the month, as molten iron production continued to decline and market demand waned, total inventories of coke and coal began to accumulate steadily. Market prices for raw materials reflected the negative feedback effect of shrinking steel mill profits, reduced production, and maintenance shutdowns. As a result, spot prices continued to fall during the first half of the month, and coking coal prices experienced three rounds of price cuts, with coking coal prices falling in tandem. In late December, as steel mills slowed down their maintenance and production cuts, marginal demand for raw materials began to recover. Moreover, overall contradictions in the steel market remained limited, prompting prices to bottom out and rebound. In December, the average price of Grade-One Coking Coal at Rizhao Port was 1,454 yuan/ton, down 60 yuan/ton from the previous month; the average price of low-sulfur prime coking coal in Linfen was 1,540 yuan/ton, down 120 yuan/ton from the previous month.

Looking ahead to January, the primary contradiction in the coking coal market lies in the uncertainty surrounding the extent of supply recovery and the expectation of subdued winter stockpiling demand from downstream users. These supply-and-demand dynamics will once again fuel a tug-of-war between bullish and bearish forces. We expect the average price of the coking coal market in January to be higher than in December, but the price trend will likely show a slight rebound from lower levels before falling again.

From several driving perspectives, it will be relatively difficult for coking coal prices to continue falling in January. There are some fundamental factors providing support, meaning prices have a floor.

First, blast-furnace iron production has essentially bottomed out, with expectations of a slight rebound; second, steel mills’ profits are now higher than those of coke, and they are expanding at an accelerating pace, making it increasingly difficult to further reduce raw material costs.

However, several uncertainties are weighing on short-term gains:

First, regarding coking coal supply, thanks to the strong start in production and the fact that the 2026 Spring Festival falls relatively late, most market participants expect a significant rebound in coal mine production starting in January, now that maintenance at major producing mines has come to an end. Although the market reports that key enterprises in major producing regions are highly motivated to maintain stable prices, the market response has been relatively muted. Second, on the demand side, coking steel companies are still primarily replenishing their inventories based on actual needs. At current coking coal price levels, they have not yet unleashed concentrated purchasing demand. This is partly due to profit considerations—companies prefer to wait and see before making low-priced, cost-effective purchases—and partly because the window for inventory replenishment remains relatively wide, and coking steel companies already hold fairly high inventories of coking coal. Given the ongoing uncertainty surrounding demand at the start of the year, the room for further inventory replenishment is limited.

Overall, short-term market prices are likely to continue fluctuating within a narrow range, primarily revolving around the cost of warehouse receipts. We expect the market to remain on hold until early January, when it will become clearer how blast furnace output levels, inventory buildups of finished products, and whether coal mines resume production as scheduled will influence the willingness to replenish inventories—and subsequently drive price movements.

Note: In the text

Thread: Shanghai Thread

Hot coil: Shanghai

Iron ore: Qingdao Port

Scrap steel: Zhangjiagang heavy scrap (thickness ≥

Coke: Grade-One Standard Shipped from Rizhao Port

Coking Coal: Linfen Low-Sulfur Prime Coking Coal