In the second half of May, the daily average crude steel output from major steel producers dropped by 1.42%, which was less than what many had anticipated. Despite this reduction, the overall production levels remained relatively high. In fact, the daily crude steel output reached its highest level in four months during this period. According to the latest data from the China Steel Association, the average daily crude steel output in May stood at 2,154,400 tons. This marked a decrease of 31,000 tons or 1.42% compared to the 2,185,400 tons recorded in mid-May. For key steel enterprises, the daily output was 1,709,500 tons, down from 1,750,500 tons in mid-May, representing a 1.78% decline.
As June approaches, the seasonal slowdown in demand is becoming more apparent. At the end of May, the daily sales volume of steel products from 82 key steel companies was 1,696,400 tons, a drop of 25,300 tons or 1.47% compared to the 1,721,700 tons recorded at the end of April. However, certain segments within the steel industry showed better performance. The sales of long products increased by 2.71% to 22,365.7 thousand tons, up from 21,176.3 thousand tons in April. Meanwhile, sheet and strip sales rose by 4.75% to 21,551,300 tons, compared to 20,573,100 tons in April.
Inventory levels for major steel companies have also seen some improvement. As of the current ten-year period, the inventory of steel in the 82 key steel enterprises was reported at 12.96 million tons, a decrease of 716,500 tons or 5.24% from the 13.68 million tons recorded in mid-May. Although there was a significant drop, it still remained above the annual average of 12.63 million tons. The number of days of inventory on hand was 7.54 days, down from 7.98 days in mid-May, and below the 13-year average of 8.0 days. The days of inventory sold were approximately 7.64 days, a decrease of 2.64 days from 10.28 days in mid-May, and well below the 13-year average of 9.3 days.
Steel ex-factory prices fell to their lowest level since December last year. The average selling price for steel in the 82 key enterprises was reported at 4,082 yuan per ton, a decrease of 41 yuan per ton or 0.99% from 4,123 yuan per ton in mid-May. Among subcategories, the sales price of long products remained relatively stable at 3,834 yuan per ton, while the price for plate products dropped by 2.3% to 4,222 yuan per ton. The average price for pipe products was 5,205 yuan per ton, down 0.7% from the previous month.
**Investment Strategy:** Since entering the start-up season, demand has shown a weak recovery trend. However, the supply side has been more aggressive in expanding output. The daily crude steel output hit a short-term record high, and steel inventories have risen accordingly. Steel prices have fluctuated weakly, and despite a rebound in key steel company inventories in May, prices hit a yearly low. Yet, steel producers have not demonstrated enough commitment to curbing production. The daily crude steel output only decreased by 1.4% from the previous month, and prices continued to fall. With the shift in demand into the off-season in June, if steel mills do not make meaningful progress in reducing output, steel prices may remain low in the short term.
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