Overview: After the Spring Festival in 2025, the steel market will resume production and work, and the downstream of hot-rolled strip will gradually resume production, and demand is expected to gradually recover. However, due to the early Spring Festival, terminal demand has not yet started. The actual demand in Tangshan’s hot-rolled strip market is relatively cold, and the social inventory of hot-rolled strip continues to accumulate. It has now exceeded 1 million tons, which is higher than the same period in the past four years. This article will analyze and predict why the social inventory of hot-rolled strip in Tangshan has accumulated so obviously this year, and when it will be reduced.
A large number of hedging resources entered the market before the Spring Festival. After the Spring Festival, Tangshan’s hot-rolled strip steel inventory accumulated significantly. As of February 13, Tangshan’s hot-rolled strip steel inventory was 1.01 million tons, an increase of 517,100 tons from before the Spring Festival and an increase of 217,700 tons from the second week after the Spring Festival last year. According to the survey, about 80% of Tangshan’s hot-rolled strip steel social inventory is currently hedging resources, and the rest is steel mill inventory, downstream uncollected inventory and unilateral inventory. After 2021, the price fluctuations in the steel market are large, and the market is no longer the more resources, the higher the profit. Therefore, in order to lock in prices and hedge risks, market traders have chosen hedging as a risk management tool to help companies stabilize profits, optimize capital management, and enhance market competitiveness, thereby effectively responding to the uncertainty brought about by price fluctuations.
Before the Spring Festival in 2025, the demand for Tangshan hot-rolled strip steel spot market was sluggish, downstream enterprises operated cautiously, and raw material inventories remained at a low level. At the same time, there were many uncertainties in the external environment after the Spring Festival, but the futures market price rose. The spot price of 2.5*395mm and the basis of the hot-rolled coil 2505 contract on the market were between -180 and -190. Most merchants believe that the current basis level is more reasonable, so they choose to carry out winter storage operations through hedging to lock in profits and reduce risks. After the resumption of work after the Spring Festival, the inventory of hot-rolled strip steel in Tangshan accumulated rapidly.
The 2025 Spring Festival statutory holiday ended on February 17, and the hot-rolled strip trade and downstream companies have gradually returned to work. However, compared with the previous two years, this year’s return date is earlier in the Gregorian calendar, and most terminals have not yet started, and the downstream has not yet fully started. Although everyone is generally optimistic about the post-holiday market, due to the long waiting time and the US tariffs, the mentality of some market participants has weakened, and downstream replenishment is still cautious, resulting in slow digestion of hot-rolled strip resources in the market.
Tangshan’s supply is reduced and terminal demand is started. Tangshan’s strip steel inventory is expected to decrease.
Although the current social inventory level of Tangshan hot-rolled strip steel is relatively high, the supply and steel mill inventory are at a medium level. As of February 12, Tangshan’s hot-rolled strip steel output was 626,600 tons, a decrease of 86,900 tons from the same period last year. Some steel mills plan to carry out maintenance in February and March, and the overall supply is expected to decrease slightly. In addition, the current profit level of steel mills is relatively low, so steel mills are more willing to support prices. After the hedging basis of futures and spot narrows, the number of positive hedging merchants has decreased. In addition, the current futures and spot basis has narrowed by 20-30, which has also prompted some merchants to unwind in small batches.
With the end of the Lantern Festival, the last important festival in the Spring Festival customs, the tide of returning to work has gradually begun, and terminal demand will start one after another; but it is still in the “Seven Nine Days”. Although the overall temperature this year is relatively high, the overall demand may be released slowly. Tangshan hot-rolled strip steel inventory is expected to drop slightly next week.
However, rapid inventory reduction requires waiting for demand to fully start and the basis to continue to narrow. According to the rules of previous years, it may come in mid-to-late March. However, the following trends can be followed:
1. Monetary, fiscal and real estate policies of the two sessions in early March
2. Anti-dumping trends in Southeast Asia
3. Pay attention to the policy on crude steel production capacity and structural adjustment
Risk warning: The environment is changing, opinions will change, and pay attention to the latest opinions in time
Post time: Feb-14-2025