In yesterday's trading session, China's domestic steel market experienced a broad-based rebound, operating with a strong bias. The futures market saw all black commodities trading in positive territory, with rebar rising 0.97%, hot-rolled coil up 1.06%, iron ore gaining 2.57%, coke climbing 2.69%, and coking coal advancing 1.48%. The spot market followed suit with synchronized gains, as rebar prices in multiple regions edged higher. End-user procurement activity improved compared to the previous period, leading to a marginal enhancement in overall transaction volumes.

This rebound is the result of multiple favorable factors converging. First, cost-side support has been consistently strengthening. Coking production cuts and temporary coal mine shutdowns have tightened raw material supply, coupled with expectations of supply disruptions from overseas port strikes affecting iron ore, underscoring the resilience of raw material prices. Second, supply-side contraction continues to gain momentum, with steel mills conducting proactive maintenance, finished product inventories steadily declining, and demand-side conditions improving as high temperatures gradually ease from mid-to-late August. This is expected to accelerate the pace of essential demand release, gradually optimizing the supply-demand balance. Third, policy-driven bullish sentiment is heating up, with over 7 trillion yuan in infrastructure funds set to be gradually deployed in the second half of the year. The accelerated construction of the "six networks" and the maintenance of reasonably ample monetary policy are fueling market expectations for stronger economic stabilization measures, collectively driving a concentrated recovery in market sentiment. Overall, the steel market is expected to maintain a stable-to-strong recovery trend today, with the scope of spot price increases likely to expand further.

Macroeconomic Highlights

First, the government has outlined key priorities for macroeconomic policy in the second half of the year, focusing on more vigorous and practical measures to effectively expand domestic demand. According to a recent press conference held by the National Development and Reform Commission, a plan to implement the strategy of expanding domestic demand (2026-2030) is being rapidly developed. On the investment front, the government will capitalize on the peak construction season in the third quarter to accelerate the deployment of 800 billion yuan in new policy-based financial instruments and expedite the issuance and use of special bonds. On the consumption front, efforts will be directed at unlocking the potential of service consumption and promoting spending on smart consumer products.

Second, short-term housing prices are expected to continue their structural upward trend. The property market in July showed an "off-season but not weak" performance, driven by a combination of factors including ongoing policy support, demand from core cities, and the concentrated launch of high-quality upgraded homes. Short-term housing prices are anticipated to maintain a structural upward trajectory, with policy support effects and the market's self-repair capabilities continuing to interact. As the traditional peak season of "Golden September and Silver October" approaches, transaction volumes in core cities are expected to rebound further.

Third, the operational foundation of the commodities market remains broadly stable. Data from the China Federation of Logistics and Purchasing indicates that the China Commodity Price Index (CBPI) for July 2026 stood at 128.6 points, a 1.3% month-on-month decline but a 15.5% year-on-year increase. The index has fallen for two consecutive months, influenced by the pullback in international crude oil prices, seasonal factors, and extreme weather conditions like strong typhoons. However, the significant year-on-year gain suggests the overall operational base of the commodities market remains solid.

Analysis of Spot Market Segments

Construction Steel prices showed a stable-to-strong trend yesterday. With the recent marginal easing of high temperatures, the pace of construction activity for downstream infrastructure and real estate projects has accelerated, leading to an increase in essential procurement. Trader sentiment improved, raising their willingness to replenish inventories, and overall transaction volumes were significantly better than in previous days. This has alleviated the pressure of destocking social inventories. Additionally, the strong rebound in iron ore prices provided robust cost support, and the ongoing macro-level expectations for stable growth reinforced the market's firm price-supporting stance. With room for further marginal release of downstream demand, construction steel prices are expected to continue their narrow-range, strong performance today.

Hot-Rolled Coil prices saw a stable-to-modest increase yesterday. Trader willingness to support prices was high, and low-priced resources gradually diminished. With current policy expectations for stable growth in the manufacturing sector intensifying, downstream sectors such as auto parts, hardware processing, and general machinery maintained a steady, demand-driven restocking pace. While overall activity remains at off-season levels, signs of marginal stabilization in orders are emerging, and the pace of inventory destocking has accelerated compared to the previous period. The collective rebound in raw material prices, including iron ore and coking coal, further strengthened cost support for hot-rolled coil. Today, the market is expected to maintain a stable-to-modest upward trend.

Scrap Steel prices were mainly stable with some adjustments yesterday. On the supply side, recycling bases and traders returned to a cautious operational strategy of low inventories and fast turnover, ensuring a stable flow of market resources. Some regions experienced structural tightness in supply due to low collection volumes. On the demand side, with finished product prices rebounding, steel mill profit margins improved marginally. Most mills maintained a restocking pace based on regular demand, providing a solid floor for scrap steel demand. The scrap steel market is expected to continue its stable-to-strong performance today.

Iron Ore prices experienced a strong rebound yesterday. On one hand, expectations of port strikes intensified, affecting iron ore shipments and rekindling concerns about supply-side disruptions, breaking the previous consensus of ample supply. On the other hand, domestic expectations for a marginal recovery in the real estate and infrastructure sectors increased. After a period of inventory reduction, steel mills' restocking needs are gradually emerging, with spot port transactions showing a noticeable increase in activity. Trader willingness to support prices has strengthened. Iron ore prices are expected to continue their relatively strong, volatile trading pattern today.