March 9, 2026 – The global steel market experienced a dramatic roller-coaster ride on Monday. Driven by the Strait of Hormuz crisis triggered by the US-Iran conflict, international crude oil prices briefly surpassed the $110 per barrel mark, fueling a broad rally in China’s ferrous complex. However, the situation reversed sharply in the afternoon as news of a coordinated G7 strategic petroleum reserve release triggered a steep oil price sell-off, causing steel futures to retreat from their intraday highs. In the butterfly effect of this energy crisis, domestic steel prices exhibited intense volatility. The tug-of-war between steel mill production cuts/maintenance and the recovery in demand intensified, presenting the industry with new opportunities and challenges.

I. Energy Crisis Shockwave: Cost-Push Drives Sharp Steel Price Fluctuations

Amidst geopolitical influences, the international crude oil market witnessed historic swings. WTI crude futures surged to $112.4 per barrel at the open, while Brent approached the $120 mark, hitting a five-year high. With energy costs accounting for over 40% of steel production expenses, prices of raw materials like coking coal and iron ore followed suit. Spot prices for primary coking coal in the Tangshan region jumped 8.3% in a single day. This cost-push effect was clearly reflected in the spot market, with average hot-rolled coil quotes across 24 major Chinese cities rising by RMB 45/ton compared to the previous week.

However, midday reports of a coordinated G7 strategic petroleum reserve release sent international oil prices into a tailspin. By the close, Brent crude had fallen below $107 per barrel, recording an intraday volatility of 10.8%. Consequently, the main coking coal futures contract retreated 5.51% from its daily limit high. The main rebar futures contract settled 1.29% higher, while hot-rolled coil futures pared gains to 1.56%. This turbulence quickly transmitted to the domestic market. A major steel producer in East China noted that coke procurement prices have already surpassed RMB 3,000/ton, while scrap steel prices have increased by 25% year-on-year.

II. The Dual Game of Macro Policy and Industry Data

According to data from the National Bureau of Statistics, February’s CPI rose 1.3% year-on-year, while the PPI fell 0.9%, marking the fifth consecutive month of narrowing declines. The manufacturing PMI rebounded to 51.2%. Within this, the ex-factory price index for ferrous metal smelting and rolling increased by 2.3% month-on-month, indicating a gradual recovery in industrial demand. The latest data from the China Iron and Steel Association (CISA) showed average daily crude steel output in February at 2.457 million tons, down 5.1% month-on-month. Among 58 key construction steel producers monitored, 36 implemented production cuts or maintenance, cumulatively impacting an estimated 4.07 million tons of output.

Notably, inventory pressure is showing structural divergence. As of March 5th, total inventory of the five major steel products stood at 23.89 million tons, a year-on-year increase of 12.6%. A divergence emerged between mill and social inventories: mill inventories fell by 3.8%, while social inventories rose by 5.2%. This suggests that end-user demand has yet to fully materialize, while traders exhibit a stronger willingness to stockpile. Concurrently, Baosteel took the lead by raising its April ex-factory prices by RMB 200/ton. Leading competitors like Angang and HBIS are expected to follow suit, creating a ripple effect on pricing.

III. Intense Confrontation Between Bullish and Bearish Forces

Amidst the dual influence of geopolitical conflicts and policy adjustments, the market presents a complex picture of competing forces. On the bullish side, policy dividends continue to be released: Baosteel’s price adjustment has bolstered industry-wide price hike expectations; local government special bond issuance reached RMB 1.2 trillion in January-February, with funds directed towards transportation and energy sectors, contributing to an 18% year-on-year increase in major project starts. Export prospects are also favorable, with January steel exports surging 23% year-on-year, driven by robust demand from emerging markets like Southeast Asia and the Middle East.

However, bearish factors cannot be overlooked. Current rebar inventory stands at 13.2 million tons, and at the current pace of destocking, it would take 12 weeks to return to normal levels. The February steel industry PMI sub-index for raw material inventory fell by 3.5 percentage points month-on-month, reflecting tightening corporate cash flow. With the conclusion of the Winter Olympics, market expectations of loosening production restrictions are growing, weighing on forward contract prices. Furthermore, the EU has initiated an anti-dumping investigation into Chinese hot-rolled coil, involving an estimated amount exceeding $2 billion. Increasing trade barriers are forcing companies to adjust their export strategies.

IV. Industry Transformation and Market Outlook

Catalyzed by the energy crisis, the steel industry is accelerating its transformation and upgrading. Inner Mongolia Jingjiu’s cold-rolled stainless steel project commenced production, adding an annual capacity of 150,000 tons and filling a gap in the northern high-end sheet market. Baowu Group’s hydrogen-based shaft furnace demonstration project at its Zhanjiang base has entered the equipment installation phase, aiming to achieve breakthroughs in low-carbon metallurgy technology within the year. These developments indicate that the industry is tackling cost pressures through technological innovation and industrial chain extension.

In the short term, steel prices are expected to exhibit high-level volatility. The main rebar futures contract finds support at RMB 4,800/ton and resistance at RMB 5,050/ton. For hot-rolled coil, focus will be on the battle around the RMB 5,000/ton psychological level. It is recommended that producing enterprises capitalize on futures premium opportunities for hedging, while traders should control inventory pace and avoid chasing rallies or selling into dips. Over the medium to long term, differentiated products like special steel and stainless steel stand to benefit from manufacturing upgrades, while integrated steel companies with mining resources can lock in profits through futures hedging.

This latest energy crisis triggered by geopolitical events has both exposed the steel industry’s heavy reliance on imported raw materials and accelerated its transformation and upgrading process. Against the backdrop of a “stable growth” policy stance, improving demand expectations and supply-side constraints are creating a dynamic equilibrium, potentially ushering the industry into a new phase of wide-range volatility. Market participants must closely monitor three key variables: the pace of Fed rate hikes, the extent of domestic real estate policy relaxation, and the progress of steel mill production restarts, in order to capitalize on structural market opportunities.