March 2 News: This week, the global steel industry has entered a period of deep adjustment due to multiple factors. The sudden escalation of geopolitical conflicts in the Middle East, coupled with increased US tariffs on Chinese goods, and simultaneous domestic environmental production limits and steady-growth policies, have created a “cost-driven” volatile market pattern. According to monitoring data from the Today Steel Research Institute, as of March 2, the Platts 62% Iron Ore Index stood at $128.5 per ton, up 4.2% week-on-week; the main Shanghai rebar futures contract closed at 4,280 yuan per ton, a rebound of 3.6% from the low point before the holiday season.

I. Geopolitical Crisis Ignites Energy Costs, Global Supply Chain Under Renewed Pressure

1.Middle East Conflict Boosts Shipping Premiums
The aftermath of the assassination of Iran’s Supreme Leader Ayatollah Ali Khamenei continues to unfold, with a joint statement from the US, UK, France, and Germany escalating regional tensions. Brent crude futures jumped 13% to $82 per barrel on Monday, while WTI crude broke through the $75 mark, hitting a six-month high. According to shipping agency calculations, freight rates for oil tankers on Middle East routes soared 40% in a single week. The Baltic Capesize Index (BCI) for iron ore rose 18.7% week-on-week, directly increasing the landed cost of imported ore by approximately $8-12 per ton.

2.Trade Barriers Pose New Challenges
The US Department of Commerce announced on March 1 the imposition of countervailing duties on photovoltaic modules from India and Indonesia. On the same day, it initiated procedures to raise tariffs globally to 15%, planning to add restrictions on six major industries including batteries and chemicals. The China Iron and Steel Association issued an urgent statement, pointing out that this move would indirectly affect the export of over 5 million tons of steel products annually. It is noteworthy that the dispute over hot-rolled coil between China and South Korea was resolved through a price undertaking mechanism. However, South Korea’s new regulations implementing quota management for Chinese steel exports could reshape the steel trade landscape in East Asia.

II. Domestic Policy Mix Takes Effect, Market Structural Differentiation Intensifies

Monetary Policy Signals Steady Growth.The central bank announced on March 2 that it would reset the foreign exchange risk reserve requirement ratio for forward sales of foreign exchange to zero, signaling exchange rate market reform. Combined with the previous “Shanghai Seven Measures” property market policies—reducing the social security contribution period for non-local buyers in the outer ring road to one year and expanding VAT exemption—the market anticipates a boost in construction steel demand by approximately 3-5 percentage points. Research by Shanghai Steelhome shows that orders for pipe and pile enterprises in East China surged by 27% month-on-month, confirming signs of front-loaded infrastructure investment.

Environmental Production Limits Suppress Short-Term Supply.Tangshan City will implement phased emission reduction measures starting March 4, requiring blast furnaces to operate at a minimum 30% reduced capacity, directly impacting average daily hot metal production by about 120,000 tons. Coupled with maintenance plans at enterprises like Shanxi Gaoyi and Donghai Special Steel, the supply of the five major steel categories decreased by 1% week-on-week, while inventory growth narrowed to 7.8%. Notably, the operating rate of independent electric arc furnaces plummeted by 29%, reflecting the dual pressures of tight scrap steel resources and negative profit margins.

III. Industry Chain Profit Redistribution, Raw Material Side Dominates Pricing Power

1.Iron Ore Remains High and Volatile
Although steel mills are cautious about restocking, supply disruptions such as the delayed restart of Vale’s Northern System and the approaching Australian cyclone season support ore prices remaining above the $125 per ton level. Total port inventory climbed to 179 million tons, but the premium for Pilbara Blend Fines expanded by 5 yuan per ton compared to pre-holiday levels, indicating firm structural demand. A major trader stated frankly: “The current decline in port clearance is more of a logistics lag effect. After the Two Sessions, we will see another pulse of concentrated restocking by northern steel mills.”

2.Coking Coal Market Deadlocked
A tentative first round of price cuts by 100 yuan per ton has been initiated, but profits for Shanxi quasi-first class coke remain at a low 19 yuan per ton. Mongolian coking coal clearance volumes have rebounded to 800 trucks per day, but short-haul freight rates at the Ganqimaodu border port increased by 25% week-on-week, eroding the price advantage of imported coal. A manager at a Shandong coking plant pointed out: “The substitution effect of chemical coke driven by the surge in crude oil prices cannot be ignored. If olefin profits continue to recover, by-product earnings from coking could improve enterprise operations.”

IV. Market Outlook: Short-Term Volatility Intensifies, Medium-to-Long Term Focus on Demand Verification

The current steel market exhibits typical characteristics of “strong macro disturbances, weak industrial logic.” A research team from CITIC Futures believes that if the Middle East situation does not worsen within March, the crude oil premium may gradually recede, and the iron ore price center could potentially correct to the $115-120 range. However, with domestic steady-growth policies being implemented intensively, a 15%-20% quarter-on-quarter increase in steel demand in the second quarter is highly probable, providing firm support for the main rebar contract around the 4,000 yuan per ton level.

It is worth noting the risk of the escalation of US tariffs on Chinese goods. Wang Jianhua, Chief Analyst at Mysteel, cautioned: “If exports of new energy vehicles, home appliances, and other electromechanical products are impacted, it will indirectly affect demand for high-end flat products like galvanized sheet and cold-rolled coil. It is recommended that companies proactively arrange overseas bases to diversify geopolitical risks.”

Reprinted from steel.com