Source:Hexun Network

China's steel market is experiencing volatility driven by rising expectations of government "anti-involution" policies, fueling optimism about potential capacity cuts. Investors anticipate stricter measures to curb chronic overcapacity and price wars, which could boost steel prices long-term.

However, this optimism remains fragile ahead of key policy meetings scheduled for late July. The market awaits concrete details on how authorities will implement the anti-involution stance across heavy industries like steel. Until then, sentiment is driving prices more than fundamentals.

The market faces a stark "strong expectations vs. weak reality" divide:

Supply Pressure: Despite decent current profits encouraging production, pig iron output remains high, preventing meaningful supply reduction.

Seasonal Demand Slump: Traditional summer slowdown (due to weather) is weakening construction demand. Current consumption is falling, raising inventory concerns.

Growing Mismatch: Stubbornly high supply combined with seasonal demand weakness is expected to increase inventory and pressure steel prices.

Consequently, steel futures are trapped in a narrow range. Policy hopes limit downside, while weak seasonal fundamentals cap gains. The market remains in a holding pattern pending clearer signals from the upcoming policy meetings.

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