In March, the price of the entire domestic ferrous metal industry chain plummeted in the fallout from faltering macro environment. A lack of strong stimulus policies during the annual sessions of NPC and CPPCC in early March weakened confidence in the economic growth. In addition, the high inventory of steel and raw materials after the Spring Festival weighed on the entire industry chain, while recovery of downstream consumption significantly underperformed the same period of previous years, with an even 20%-30% YoY demand decline in the construction industry. The imbalance between supply and demand pressured steel prices to plunge in March. Steel mills consequently slashed production, which caused prices of raw materials, such as iron ore, coke, and steel scrap to fall.
Entering April, the steel industry has welcomed a peak demand, excluding the construction industry. Considering the undervaluation of ferrous metals after price collapse in March, combined with expected inventory reduction based on low capacity of steel mills, the price of ferrous metals will fluctuate sideways in early April. In the long run, due to the weakening of steel plate exports and dim outlook for building materials, the ferrous metals may face a new round of declines if steel mill production resumption in mid-to-late April cause inventory pressure to grow again.
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