[SMM Analysis] Bearish Sentiment & Poor Fundamentals to Weigh on August Non-Oriented Electrical Steel Prices

July Price Review

Source: SMM

In July 2026, China’s non-oriented electrical steel market trended weaker, with prices across all grades starting to drift lower. Downstream home appliance and general motor industries entered the traditional off-season, and end manufacturers mostly adopted hand-to-mouth purchasing with limited willingness for bulk stockbuilding. Meanwhile, steel mills maintained relatively ample supply, leading to looser supply-demand balance and mounting inventory pressure on traders. Pervasive market caution widened spot negotiation ranges. July marked the start of the current downward price cycle, shifting market sentiment from earlier firm high levels to a weakening trajectory.

Fundamental Analysis

Source: SMM

Supply Side

Compared with July, the production scheduling mix of domestic non-oriented electrical steel will continue to optimize in August. The share of medium & low grades will edge down from 68% to 66%, high grades will stay flat at 19%, and new-energy dedicated grades will rise from 13% to 15%. Steel mills keep reallocating production capacity toward materials for new-energy motors while proactively cutting output of conventional medium & low grades.

Nevertheless, despite lower scheduled output proportion for medium & low grades, overall spot supply in the market remains relatively sufficient. Traditional home appliance and general motor sectors are stuck in demand off-season with no improvement in end-users’ hand-to-mouth buying. Competitive pressure persists for mainstream medium & low grade products such as B50A800, lacking solid price support. The market will continue the weak trend seen since July.

Source: Publicly Available Data

Demand Side

Home appliance output showed divergent performance in June. Air conditioner production fell year-on-year, while washing machine, refrigerator and TV output posted no notable growth. The traditional home appliance sector entered a phase of subdued demand. As the major downstream consumer of medium & low grade non-oriented electrical steel, the home appliance sector released limited orders and provided feeble support for this product category.

The automotive sector saw structural divergence: output of new-energy passenger and commercial vehicles stayed at high levels, continuously underpinning demand for high-grade and new-energy-specific non-oriented electrical steel. In contrast, production of conventional internal combustion engine (ICE) passenger and commercial vehicles kept declining, dragging down motor procurement demand from traditional automakers.

Overall demand presents a clear split: the new-energy vehicle segment lends support to high-grade electrical steel, whereas sluggish demand from home appliances and ICE vehicles fails to fuel consumption recovery of medium & low grade non-oriented electrical steel. No strong bullish catalysts emerge on the demand front.

August Price Outlook

Looking ahead to August 2026:

On the supply side, planned output of China’s non-oriented electrical steel will keep declining, yet the scale of production cuts will narrow, concentrated mainly on medium & low grades. On one hand, prominent off-season effects persist amid stagnant downstream demand and prevailing hand-to-mouth purchasing, dampening steel mills’ production enthusiasm. On the other hand, leading producers including Baowu lifted August base prices by RMB 50/tonne, demonstrating obvious price-defending intentions. Even so, the market holds bearish expectations that prices face greater downside than upside. In addition, most manufacturers are already operating at a loss and forced to implement production cuts.

On the demand side, the home appliance sector stays in a prolonged off-season with poor sentiment. Manufacturers have sharply reduced production schedules month-on-month. Weak domestic sales, phasing-out of state subsidies and consumption frontloading during the 618 shopping campaign weigh on the market, resulting in a marked sales drop. Manufacturers stated they will prioritize inventory destocking and further adjust production plans going forward.

The automotive market enters its off-season with deteriorating business sentiment. After mid-year sales pushes, most automakers trimmed production schedules. At the retail end, high temperatures and frequent rainfall discourage consumer vehicle purchases. Automakers and dealers have rolled back partial sales incentives, while limited launches of new models contribute to a substantial month-on-month sales decline.

On the cost side, hot rolled coil prices are projected to fluctuate weakly in August with limited upward momentum, and the monthly average price will continue to fall month-on-month.

In summary, SMM forecasts that non-oriented electrical steel prices will fluctuate downward across August 2026, with certain room for price declines.