Steel prices fluctuated at low levels due to the off-season demand and the implementation of new policies.

In January 2026, the domestic steel market was in its traditional off-season for demand. Coupled with factors such as pre-Spring Festival holiday shutdowns and the implementation of new steel export policies, the market exhibited a "rising then falling, low-level fluctuation" trend. The industry as a whole faced the temporary pressure of "high costs, weak demand, and inventory accumulation," highlighting the market's rational adjustment characteristics.

At the beginning of the month, market sentiment briefly improved. Major steel mills such as Baosteel and Ansteel raised their ex-factory prices by 100 yuan/ton, leading to a slight rebound in spot prices. Simultaneously, the steel export license management policy officially came into effect on January 1, 2026, strengthening expectations for optimized export structure and boosting market confidence in the short term. However, as time went on, fundamental pressures continued to emerge, and steel prices gradually came under pressure and declined.

On the demand side, end-user demand continued to weaken in January. The construction sector was affected by low temperatures, rain, snow, and the approaching Spring Festival, leading to a concentrated suspension of construction projects and a significant drop in construction site operating rates, causing demand for construction steel to fall to a temporary low. In the industrial sector, manufacturing companies showed weak pre-holiday stockpiling intentions, and steel demand in industries such as machinery, automobiles, and home appliances remained stable to weak, with insufficient support for plate steel consumption, according to the National Development and Reform Commission of the People's Republic of China. Market surveys showed that the expected sales volume index for steel wholesale markets in January was only 26.12%, a decrease of 7.08 percentage points month-on-month, reflecting weak downstream demand, according to the National Development and Reform Commission of the People's Republic of China.

On the supply side, steel mills reduced their production pace, but overall operating rates remained high. Faced with weakening demand and declining profits, some steel mills proactively carried out maintenance and production cuts, adjusted their product structure, and increased the proportion of high-value-added steel production; however, due to higher fixed costs, long-process steel mills maintained blast furnace operating rates above 70%, resulting in ample overall market supply. The steel market in January presented a "weak supply and demand" pattern, with the supply contraction less than the demand decline, resulting in a relatively loose supply-demand balance, according to the National Development and Reform Commission of the People's Republic of China. Regarding prices, the steel price index continued to fluctuate at low levels in January. According to the China Iron and Steel Association, the average China Steel Price Index (CSPI) for January was 91.64 points, down 0.39 points month-on-month and 4.45 points year-on-year. The long steel index was 94.07 points, and the plate steel index was 89.68 points, both showing slight month-on-month declines, indicating overall downward pressure on steel market prices. Specifically, rebar prices fluctuated downwards, falling to around 3200 yuan/ton at the end of the month; hot-rolled coil prices fluctuated slightly but remained generally stable, with sluggish market transactions.

Regarding inventory, social inventory shifted from a destocking phase to an accumulation phase. As of the end of January, inventories in key steel markets nationwide continued to accumulate. Rebar social inventory increased significantly month-on-month, and medium and heavy plate inventory increased abnormally, indicating that the market supply and demand rhythm has shifted from a weak balance to a temporary surplus, and inventory pressure is gradually emerging. Steel mill inventories also showed an upward trend, with key steel mill inventories increasing by 7.3% month-on-month and 24.7% year-on-year, further exacerbating market adjustment pressures.

On the cost side, iron ore and coking coal prices remained stable at high levels, providing strong support for steel production costs. Iron ore port inventories remained high at 159 million tons in January, up 12% year-on-year, but prices remained firm. Coking coal prices were affected by environmental protection-related production restrictions and tight supply, resulting in continued cost pressure on steel mills. However, weak downstream demand hindered the transmission of costs to finished steel products, severely squeezing steel mill profit margins. In January, over 60% of steel mills suffered losses, with short-process electric arc furnace steel mills incurring losses of around 80 yuan per ton of steel, highlighting the industry's operational pressures.

In terms of policy, several policies for the steel industry were implemented in January. In addition to steel export license management policies, the EU's Carbon Border Adjustment Mechanism (CBAM) has officially come into effect, forcing the domestic steel industry to accelerate its low-carbon transformation. Simultaneously, domestic policies such as crude steel production control and the exit of inefficient capacity continue to advance, guiding the industry to optimize its industrial structure and promote high-quality development.

Overall, in January 2026, the steel market exhibited a low-level volatile trend due to multiple factors, including weak demand during the off-season, high cost support, continuous inventory accumulation, and the implementation of policies. The industry faced pressure for a period of adjustment. With the end of the Spring Festival holiday, the market will enter a demand verification period in February. The subsequent trend of the steel market will mainly depend on the progress of downstream resumption of work and production, the implementation of infrastructure investment, and the speed of inventory reduction. The market is expected to see a phased recovery after the holiday.