Steel market enters "destocking" stage
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September 27 11:29:28, 2025
The domestic steel market has entered a critical phase, marked by significant inventory pressure and evolving market dynamics. Since the end of last year, the sector has faced continuous challenges, with rising social inventories and weakening demand, especially around the Spring Festival period. As construction activity increased, so did the stockpiles, leading to heightened pressure on the market. By early March, this pressure peaked, prompting subtle shifts in supply and demand.
Recently, prices for rebar in Beijing and hot-rolled coils in Tianjin have seen modest increases, signaling a potential turning point. Although some steel products remain stagnant in price, trading volumes have begun to rise, indicating that market participants are starting to react more actively. This gradual shift suggests that the market is moving toward a "de-stocking" phase, where inventory levels will slowly decline as demand picks up.
The de-stocking process is expected to be challenging. Despite improved effective demand, the market must not only absorb current steel production but also reduce existing stockpiles, creating significant pressure. During this phase, the overall market remains weak, with a strong wait-and-see attitude among traders. Prices are still in a downward trend, though some products show signs of stabilization or even slight recovery, which could boost market confidence.
Steel output is currently at a low level, and while demand is slowly increasing, it's not yet enough to significantly impact inventory levels. A small influx of off-site capital into procurement activities may help, but the overall market remains cautious.
Social inventories across the country have reached around 20 million tons, with construction steel alone accounting for over 13 million tons. Guangzhou, for instance, holds the highest inventory due to seasonal concentration and price differences between northern and southern markets. The price gap between Beijing and Guangzhou for rebar once reached 400 RMB per ton, leading to a southward flow of resources and a surge in Guangzhou’s stock.
Beijing’s construction steel inventory stands at about 100,000 tons, while Shanghai remains stable at 600,000 tons. In Tianjin and Shenyang, inventories exceed 500,000 and 600,000 tons respectively. These high levels reflect the slow start of the construction season and the lingering effects of seasonal demand fluctuations.
Sheet metal inventories, including hot-rolled and cold-rolled coils, total over 6 million tons, slightly less than construction steel. Export activity has helped alleviate some pressure, but regional disparities persist. In Shanghai, hot-rolled coil inventories stand at around 1 million tons, while cold-rolled stocks are about 400,000 tons. Guangzhou also faces significant cold-plate inventory, with over 600,000 tons in stock.
Despite these pressures, the market is gradually adjusting. Price thresholds in Beijing and Shanghai are being tested, with construction steel prices near 3,100 RMB/ton showing some support. However, instability remains, and the Guangzhou market, with prices below 3,400 RMB/ton, still offers some appeal.
Price differences between regions and product types continue to create market volatility. In Tianjin, hot-rolled coils are 100 RMB/ton higher than rebar, while in Guangzhou, the gap is smaller. These discrepancies add to market uncertainty and make it harder to achieve stability.
As March approaches, the peak of social inventory pressure is expected to ease. With the slowdown in raw material prices and continued production, the market will need to adjust further. However, as the seasonal demand begins to pick up, the market is likely to transition into a more stable de-stocking phase, setting the stage for a gradual recovery.