China’s ferrous market abandons ‘Golden March and Silver April’ expectation amid poor outlook and limited demand

Market participants seem to have abandoned expectations of a “Golden March and Silver April” in China’s ferrous market due to a slow restart of construction, as well as maintenance of steelmaking facilities planned for March, sources told Fastmarkets

“Golden March and Silver April” refers to the traditional peak season for steel consumption in China, typically amid improved weather conditions and a ramp-up of production at mills after the Lunar New Year (LNY) holiday.

But this year, extreme weather conditions have been sweeping over large swaths of China, leading to weak steel demand. This, along with reduced costs following price cuts for key steelmaking raw materials, has weighed on finished steel prices in the post-holiday period, sources said.

Mills plan for maintenance in March amid accumulated steel stocks

Several sources said the lack of strong stimulus measures and the weak performance in China’s real estate sector have led to more bearish sentiment.

Some mills in southern China have announced maintenance of blast furnaces (BFs) and rolling lines lasting up to a month, starting in March. Long steel was the main product affected by these maintenances.

“The high inventories of long steel at steel mills and on the spot market were the main reason for the production cut,” an industry analyst said.

For instance, rebar stocks in China’s major cities totaled 8.45 million tonnes on Friday February 23, an increase of 960,000 tonnes from a week earlier, according to a local industry information provider.

The less bullish expectation of demand for long steel products also pushed steel mills to start planning to reduce rebar production in March, sources said.

The property market had no signs of recovery in the short term, so a trader in Shanghai expected demand for long steel to be weaker in March and April compared with the corresponding period of the past few years.

A Hebei-based mill source said that the announced maintenance plans for BFs are mainly for steel or rebar producers in southern China, adding that there were “not many maintenance plans announced in northern China recently.”

Some profit-losing steel mills were heard to be maintaining their steel production, with losses easing after the previous drop in prices for raw materials, including iron ore and coke.

“The peak period for blast furnace maintenance work has ended,” a Zhejiang-based trader said. “The resumption of hot metal production will continue with slightly improved profits.”

Weak steel exports also dampen the market outlook

Aside from the absence of a substantial seasonal recovery in China’s domestic steel demand after the LNY holiday, continued weakness in the export market also cast a cloud over the steel market outlook for the forthcoming spring period, market participants said.

Trading for exports of Chinese finished steel products such as hot-rolled coil, cold-rolled coil and hot-dipped galvanized steel coil remained subdued so far after the holiday, with overseas buyers refraining from bidding or bidding too low to be workable for transactions, traders and mill sources told Fastmarkets.

Fastmarkets’ calculation of its daily steel hot-rolled coil index export, fob main port China dropped to $552.67 per tonne on Thursday February 29, a low not seen in over three months.

“Unlike last year, [overseas] buyers remained cautious in replenishing their stocks even after prices dropped, probably due to the easing impact of the Russia-Ukraine war, the earthquake in Turkey and the softened outlook for China’s post-pandemic economy recovery,” a steel exporter in China said.

Growing supply from regions such as India and Southeast Asia and persistent tensions in the Red Sea are also constraining demand for Chinese steel exports, a second Chinese steel exporter said.

“While the impact of Red Sea tensions on Chinese exports looks limited so far, buyers such as those in the Middle East, [which is an emerging market for Chinese steel exports,] are set to turn to Russia-origin cargoes rather than Chinese cargoes if offers are at similar levels,” the second Chinese steel exporter added.

Customs data shows that China’s finished steel exports to the Middle East-North Africa (MENA) region surged by over 60% year on year to 18.1 million tonnes in 2023.

The first steel exporter source expected Chinese steel prices to rise in March – given the seasonal recovery in demand and the expectations for stimulus measures from key political meetings to take place the following week – but added that the price gain was expected to be limited.

Chinese traders widely believed that the steel recovery in March-April is very unlikely to meet expectations, leading to a pullback in prices.

Iron ore prices are capped with limited expectations of further stimulus measures

A Beijing-based mill analyst said that mills’ BF maintenance would further dampen iron ore demand in March, but more pressure might come from weak expectations on downstream steel consumption and destocking speed of steel products in the first half of 2024.

Fastmarkets’ daily index for iron ore 62% Fe fines, cfr Qingdao was calculated at $117.46 per tonne on Thursday, up by 0.25% day on day from $117.17 per tonne, but down by 9.26% from $129.45 per tonne on February 8 – the week before LNY holiday.

Some market participants adopted a more cautious attitude toward iron ore price movement because the speed of recovery in downstream steel demand was not as good as expected in early February.

“We haven’t seen a clear decrease in steel product stocks, [which is usually] the signal for the start of the peak season in steel consumption [in China],” a Shandong-based trader added.

But a few market participants were hopeful for more stimulus measures to be announced by the Chinese government in March during the Two Sessions, in which the main political bodies of China gather to plan for policies regarding the economy and more.

“We are still observing, and it is uncertain whether we will cut production on a large scale during the peak season this year,” a second Hebei-based mill source said.

“Many factories and construction sites have just resumed work after the Chinese Lantern Festival [on February 24], so steel demand could slowly pick up,” the same source added, noting that if the destocking of steel products goes smoothly, it is possible for faster recovery of steel production in March.

Supply of domestic coking coal is tight and market likely to be weak with tepid demand

The domestic supply of coking coal is likely to be tight in the following months due to coal inspections in production hub Shanxi province, market participants said, but suggested that Chinese coking coal would be weak due to the tepid demand from steel mills.

“I have heard that many coal miners in Shanxi are going to cut production to follow the guidance of a notice from Shanxi provincial authorities regarding coal mine inspections, which will make the supply tight in the following months,” an international coking coal trader in eastern China told Fastmarkets.

“However, I have not seen any good sign in demand for coking coal from downstream such as steel mills yet,” the same source added.

A steel mill source in Anhui province said that the inventory level of steel products at most mills is high now, and most mills are running at a loss.

“I feel pessimistic on whether the infrastructure construction industry in March can pick up the demand for steel products, which in turn would pull the demand for coking coal,” the same mill source added.

Ferro-silicon and vanadium hold thin hopes due to weak downstream demand

Ferro-silicon and vanadium hold thin hopes for “Golden March and Silver April” this year due to weak downstream steel demand and a sluggish real estate sector, sources said.

“Ferro-silicon is mainly made in crude steel production. I heard that crude steel output in 2024 is quite unlikely to increase and may amount to around 1 billion tonnes,” a China-based ferro-silicon source said.

“I have not heard ‘Golden March and Silver April’ for quite a long time,” a second China-based ferro-silicon source said. “The Chinese government announced some stimulus packages to boost sales in the domestic real estate industry in 2023, but it seems there has been little impact so far.”

“Approximately 80% of vanadium is used in the steelmaking industry. I suppose the year of 2023 may have witnessed the peak of steel production, and steel production and demand may gradually drop in following years,” a China-based vanadium source said.

“Vanadium redox batteries may serve as a new demand driver, but it will still take two or more years for the wide application of vanadium redox batteries,” a second Chinese vanadium source said. “Maybe for the next two years, vanadium will stay quite weak.”

Navigate the complex steel markets with our reliable and market-reflective steel price data and transparent pricing methodology. Learn more about steel and steel raw materials prices, news and analysis today.

What to read next
China’s National Development and Reform Commission (NDRC) will work with relevant parties to regulate crude steel production, with a focus on energy saving and reducing carbon emissions. It will also release guidance on crude steel output for different steel mills later this year after a national investigation on steel capacity
Fastmarkets proposes to amend the specifications of five of its steel products assessments and billet index originating from the Black Sea basin.
China's stainless steel prices saw a notable increase last week, driven by global sanctions affecting nickel, which is a key component
Take a look at the five key talking points across the aluminium raw material markets ahead of Fastmarkets’ Bauxite & Alumina Conference
Metal exchanges will be prohibited from accepting these metals from Russia, said releases from the US and UK governments on Friday April 12
Fastmarkets will amend the frequency of its price assessments for MB-STE-0879 Steel scrap H2 Japan origin import, cfr South Korea and MB-STE-0880 Steel scrap HMS 1&2 (80:20) deep-sea origin import, cfr South Korea on Friday April 12.