【Steel Market】High Inventories in March: "Slow Grinding Pressure" ...

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【Steel Market】High Inventories in March: "Slow Grinding Pressure" — Who Will Lead Under Diverging Demand?

Steel inventories increased to varying degrees after the Spring Festival

After the Spring Festival, inventories of steel products increased seasonally. In terms of inventory growth, construction steel recorded the largest increase, with post-holiday inventories reaching 13.2363 million tons, up 64.17% compared with before the holiday. The next largest increase was seen in hot-rolled coils, with post-holiday inventories at 4.8027 million tons, up 34% from pre-holiday levels. Cold-rolled products and medium & heavy plates increased 15.41% and 10.25% respectively compared with before the holiday.

Post-holiday social inventories of construction steel totaled 8.5487 million tons, an increase of 2.028 million tons or 31.1% compared with pre-holiday levels. Steel mill inventories stood at 4.6879 million tons, up 1.4075 million tons or 42.9% from before the holiday. The large increase in mill inventories is mainly due to winter stockpiling resources being positioned earlier, with traders locking in goods that remain stored at steel mills and later delivered directly to consumption regions.

Hot-rolled coil inventories accumulated around the Spring Festival period, and after the holiday the market returned to focusing on destocking through shipments, with spot prices under downward pressure. The national average price of hot-rolled coil currently stands at RMB 3,240/ton, down 1.04% from the average price at the end of last month. The latest hot-rolled coil inventory level is 4.8027 million tons, up 34% month-on-month and 7.35% year-on-year. During the Spring Festival holiday, steel mills maintained a normal production pace while demand gradually stagnated. Combined with winter stockpiling operations in the market, inventory accumulated rapidly.

After the holiday, inventories of steel products have all increased, particularly construction steel and hot-rolled coils. Under the pressure of high inventories, steel prices in March will face certain downward pressure.

Table 1: Changes in Steel Product Inventories Before and After the 2026 Spring Festival

Unit: 10,000 tons

Data source: Sublime China Information

Production May Increase Significantly in March

According to maintenance and production plans released by steel producers, steel output in March will increase to varying degrees. Among them, construction steel is expected to see the largest increase, mainly because electric arc furnaces (EAFs) suspended production for maintenance during the Spring Festival holiday and will resume operations afterward. In addition, the end of previous production cuts due to maintenance will also result in a noticeable increase in output, although year-on-year levels may still be slightly lower.

The next largest increase is expected in medium and heavy plates. Currently, inventory pressure for these products is not high, and coupled with modest profitability, steel mills are gradually resuming production, resulting in higher output.

Finally, cold-rolled coils and hot-rolled coils will also see production increases. Cold-rolled production is recovering from maintenance-related reductions during the Spring Festival period, while downstream demand has gradually increased since 2025, supporting continued growth in output. The increase in hot-rolled coil production will be the smallest among the categories, but its overall output remains second only to construction steel. Since production during the holiday remained relatively normal, the increase will be slightly smaller, though the absolute increment remains considerable.

From an output perspective, steel production in March will increase significantly. Based on the current expected growth rate, this will place varying degrees of pressure on market prices and raise concerns about whether demand growth can keep pace with supply growth. Overall, market sentiment remains divided.

Table 2: Planned Steel Production in March 2026

Unit: 10,000 tons

Data source: Sublime China Information 

Demand May Become Polarized in March

Hot-rolled coil demand recovering slowly:

As an important intermediate steel product, hot-rolled coils have a wide range of downstream applications. Demand has gradually recovered after the Lunar New Year, but market feedback suggests that the pace of recovery is moderate, with trading activity mainly driven by traders restocking. Cold-rolled coils, as the primary downstream product of hot-rolled coils, are seeing output increases that help alleviate some supply pressure in the hot-rolled market. However, recovery in other downstream sectors remains slow, and overall demand is showing a gradual recovery trend.

Positive expectations for medium and heavy plate demand:

In 2026, medium and heavy plates are expected to experience structural divergence. The shipbuilding sector has a large backlog of orders, suggesting stable demand. With increasing exports of construction machinery, production in that sector may continue to grow. In addition, the wind power industry is entering a phase of large-scale development. These two industries are expected to provide strong demand support for medium and heavy plates. After the holiday, downstream demand has performed reasonably well, with trading volumes at distribution hubs rebounding quickly in the short term. Future attention should focus on the pace of terminal consumption.

Relatively stable demand for cold-rolled coils:

Supported by key downstream sectors such as automobiles and home appliances, demand remains stable and shows strong resilience. Cold-rolled coil demand recovered quickly after the holiday, and overall performance after the holiday has been stronger than before the holiday.

Construction steel demand may remain weak:

The real estate sector remains in an adjustment cycle, and new project starts are still relatively weak. Although urban renewal and renovation of old residential communities provide some support, they are still insufficient to fully offset the decline.

Steel Prices in March May Show "Strong Plates but Weak Construction Steel"

In March, all major steel products are expected to face certain sales pressure, though performance will vary. Considering current inventories, March production plans, and the pace of demand recovery, construction steel will likely bear the greatest pressure. With high inventories, increased output, and slow demand recovery, spot market prices may remain under pressure.

Hot-rolled coils will likely perform slightly better. Although currently facing high inventories and increased production alongside slowly recovering demand, short-term pressure remains. However, the situation may gradually ease later, with prices potentially showing a "weak first, then stronger" trend.

Medium and heavy plates and cold-rolled coils are expected to perform relatively better. Their inventory pressure is not particularly large, and although production is increasing, demand expectations and recovery are relatively positive. As a result, prices may trend upward within a consolidation range.

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