As the peak season draws to a close, demand is diverging, and steel prices are consolidating at high levels.

In May 2026, the domestic steel market entered the final stage of the traditional peak season, exhibiting an overall trend of high at the beginning and low at the end, mixed bullish and bearish sentiment, and a divergence between the north and south. The market saw a brief surge after the holiday, with steel prices rising in the short term. However, with the arrival of the rainy season in the south and a slowdown in construction activity, demand weakened marginally, and the upward momentum gradually diminished. The market as a whole entered a high-level consolidation phase, with supply and demand dynamics becoming the core factor driving market trends.

Regarding price trends, the spot steel market in May initially rose and then fell. After the May Day holiday, bullish sentiment was concentrated, with both futures and spot prices rising simultaneously. Prices for various steel products generally increased, with plate prices consistently outperforming construction materials. Entering the latter half of the month, demand fell short of expectations, high-level transactions gradually weakened, traders increased discounts to move inventory, and steel prices slightly retreated. The divergence in product categories continued. Industrial steel products such as hot-rolled coils and medium-thick plates, supported by exports and manufacturing demand, showed stronger price resilience. Construction steel products like rebar and wire rod, affected by the approaching off-season for construction, experienced more pronounced fluctuations, limiting overall price increases.

Demand exhibited significant structural differentiation. The seasonal decline in construction steel demand was clear. Heavy rainfall in many parts of southern China hampered outdoor infrastructure and civil engineering construction, slowing down site procurement and weakening pent-up demand. In contrast, favorable weather conditions in northern China allowed for steady project progress, resulting in relatively robust demand for building materials and creating a north-south price difference. Manufacturing steel demand remained stable. Industries such as new energy equipment, shipbuilding, and general machinery maintained stable operations, coupled with a continued recovery in steel export orders, resulting in strong demand for high-value-added plates. This effectively offset the pressure from declining construction steel demand, supporting the overall market fundamentals.

On the supply side, overall supply remained stable with a slight contraction, and industry production control was carried out in an orderly manner. To balance supply and demand at the end of the peak season, the industry continued to implement normalized capacity control. Environmental inspections were intensified in some regions, leading to increased maintenance frequency at steel mills and a slight month-on-month decline in average daily crude steel output. Overall, there was no concentrated increase in steel mill production; production was mainly based on demand, and market supply was relatively controllable, effectively avoiding oversupply and providing a floor for steel prices.

The pace of inventory reduction slowed, gradually entering an inflection point. In early May, national steel inventories continued the previous downward trend, with both social and mill inventories steadily declining. In the latter half of the month, as demand weakened, the rate of inventory reduction slowed significantly, with some southern cities experiencing slight inventory accumulation. Overall, total inventory remains at a relatively low level in recent years, with no risk of large-scale stockpiling. The overall market inventory structure is healthy, and the basis for a significant bearish market does not exist.

Cost support remains solid, and industry profitability remains stable. In May, the upstream raw material market maintained a relatively strong trend. Iron ore demand remained stable and prices remained high, coking coal prices rose steadily, and scrap steel procurement prices increased slightly, providing solid support for overall finished steel production costs. Affected by high steel prices and controllable raw material fluctuations, steel mills maintained stable overall profitability, with the industry's loss-making areas continuing to narrow and production and operation conditions continuing to improve.

In summary, the steel market in May 2026 saw a peak season-ending adjustment. Weakening marginal demand, high cost support, and manageable inventory created a tug-of-war between bulls and bears, resulting in overall high-level fluctuations. Looking ahead, June will officially enter the traditional off-season, with construction demand further declining and upward pressure on steel prices increasing. However, low inventory levels, robust manufacturing demand, and resilient exports will limit downside potential. It is expected that the steel market will continue its range-bound trading with a divergence between strong and weak performers, with the market focus continuously adjusting dynamically based on demand realization, inventory changes, and raw material trends.