Executive Summary
China’s domestic steel market remains on a stable-to-firmer footing as we head into the final trading days before the May Day holiday (May 1–5). Downstream restocking has accelerated inventory destocking, while rising raw material costs continue to provide a floor under prices. At the same time, expectations of production cuts in May are lending psychological support, though their actual impact is expected to be moderate. This report integrates our weekly market analysis with a focused clarification on the export tax rebate policy for ordinary-grade strip steel products. Actionable recommendations are provided for both procurement managers and export sales managers.
Market Overview
Total inventories of the five major steel products dropped to 17.03 million tonnes by April 23, a week-on-week decline of 621,200 tonnes (3.5%) , accelerating from the previous week’s decline of 482,400 tonnes. Downstream restocking ahead of the holiday has clearly intensified.
Key national average prices as of April 24:
- Rebar HRB400E 20mm: CNY 3,298/t, up CNY 8/t w/w.
- Hot-rolled coil 4.75mm: CNY 3,316/t, firming slightly.
- Cold-rolled coil 1.0mm: CNY 3,680–3,760/t, steady.
- Billet (Tangshan ex-works): CNY 2,970/t, unchanged.
- Scrap: CNY 2,479.8/t, trending firmer ahead of the holiday.
Market activity has been driven by prompt downstream purchases, with rebar apparent demand reaching 2.50 million tonnes in the latest week (up 5.1% w/w). Nevertheless, high-priced offers face growing resistance, and some traders are already offering moderate discounts to lock in volumes.
May Day Holiday Impact on Pricing
The five-day holiday will interrupt normal trading, but its impact on direction is temporary:
- Pre-holiday buying pulse peaking: Apparent consumption of the five major products rose 2.4% w/w to 9.25 million tonnes. The last trading days before the break (April 27–30) will likely see a final push of restocking, but further upside is limited. A seasonal pre-holiday uplift of CNY 10–20/t is the most probable scenario.
- Market liquidity collapse during May 1–5: Spot markets and futures exchanges will be closed. Any price quotations released during this window should be treated with caution due to extremely thin sample sizes.
- Post-holiday normalization: Market activity will resume on May 6. The focus will then shift to the actual inventory build-up over the holiday and the pace of blast furnace restarts.
- Recommendation: Front-load pricing decisions to the April 24–30 window. Use the April 30 closing prices as the primary benchmark for forward deals.
May Production Cuts: Will They Support Prices?
The direction of policy is clear: China’s steel output will be capped and pushed towards structural optimization. The government’s call for production discipline was reinforced at the 2026 Steel High-Quality Development Conference. However, the magnitude and timing of cuts remain key.
Assessment of support for prices:
- Policy environment: Bullish for sentiment. Coarse steel output is targeted to decline by about 20 million tonnes in 2026, continuing the downward trend from 2024–2025.
- Current operational reality: Blast furnace operating rates rose 0.62 percentage points to 76.13% this week. Daily hot metal output increased by 14,300 tonnes to 2.26 million tonnes – suggesting mills are not yet in an active cutting mode.
- Maintenance schedules in May: Signals are emerging that more maintenance will be scheduled after the holiday. In Tangshan, environmental controls (heavy pollution orange alert) have already halted all re-rolling strip steel production lines since April 16, impacting approximately 8,000 tonnes per day. Additional curbs in northern China are likely.
- Steel margins: The average profit of 76 electric arc furnace mills is –CNY 91/t, with valley electricity profit at only CNY 16/t. Integrated mills’ profit ratio sits at 48.1%. Such compressed profitability provides an economic rationale for reducing output, though mills will only act decisively when losses widen.
Conclusion on price support: Production cuts will provide moderate support of approximately CNY 10–30/t across flat and long products in May. The effect will be more pronounced for pipes and construction steel if northern curbs intensify. However, a decisive price rally requires visible drops in daily hot metal output, which have not yet materialized.
Key Varieties Analysis
Long Products (Rebar, Billet)
Rebar inventory destocking is solid: mill inventory fell to 187,350 tonnes, social inventory to 579,100 tonnes. Still, billet inventories are 108% higher than the same period last year, signaling that de-stocking pressure will persist after the holiday. Short-term demand gains from infrastructure investment support prices, but cauTion post-holiday is warranted.
Flat Products (HRC, CRC, HDG)
Hot-rolled coil inventories are destocking more slowly than longs, with HRC inventory still up about 12% y/y. Cold-rolled coil, driven by appliances and automobile manufacturing, is the only category showing a week-on-week uptick in output, reflecting the ongoing shift towards manufacturing-driven demand.
Pipes
Tianjin region pipe mills face increased environmental scrutiny in May. Procurement managers should lock in pipe orders before the holiday to avoid potential supply disruptions and price spikes caused by output restrictions.
Specialty Steel (Stainless, Electrical Steel)
Stainless steel futures rose for seven consecutive days, lifting spot sentiment. However, downstream purchasing is cautious, preferring to digest existing inventories. Nickel ore pricing formula adjustments in Indonesia added to short-term bullish sentiment.
Raw Materials Update
| Raw Material | Price/Index | W/W Change | Short-Term Direction |
|---|---|---|---|
| Iron ore (imported) | CNY 783–789/t | Mixed | High-level support, stable to slightly soft |
| Coke (grade 1 wet quenched) | CNY 1,520/t | Up from CNY 1,460 | Firm; coking plants pushing for new price hikes |
| Scrap | CNY 2,479.8/t | Slightly firmer | Pre-holiday restocking support |
| Tangshan billet | CNY 2,970/t | Steady | Short-term floor |
Coke supply is tightening after a coking plant in Changzhi with 1.5-million-tonnes capacity began environmental-related maintenance. Iron ore demand remains strong as hot metal output rises toward 2.4 million tonnes/day, and mill ore inventories are at a near-four-year low. Billet margins are still slightly positive, sustaining production levels.
Export Policy Update – Including the Tax Rebate for Strip Steel
Overall export context:
China’s steel exports are under opposing forces. From April 1, 2026, export tax rebates were cancelled for 146 HS codes of low-value-added steel products (e.g., standard hot-rolled items except rails, wheels, and axles). Simultaneously, export licensing requirements took effect for 300 steel products from January 1, 2026. The EU’s decision to slash its tariff-rate quota to 18.3 million tonnes and double out-of-quota tariffs to 50% (effective July 1) adds significant headwinds for Vtraders.
Focused clarification: Tax rebate for ordinary-grade strip steel
A specific question has been raised: *Does the statement that “most ordinary-grade strip steel products still enjoy a 13% export tax rebate” still hold true?*
The answer is yes, with critical nuances for accurate customs classification.
- The 13% rebate for most ordinary-grade strip steel products was not abolished in the major 2021 policy overhaul (Circular No. 16, 2021), which mainly targeted hot-rolled flats. Deep-processed products such as galvanized and cold-rolled coils were retained at 13%, and ordinary strip steel falls within this preserved category.
- The April 2026 adjustment cycle focused primarily on photovoltaic, battery, and glass products, not on steel. For steel, it continued the tiered approach, and no new cancellation specifically targeting strip steel was introduced.
- Differentiation: The rebate applies to most ordinary grades; HS classification is crucial. Strip steel with a width of 600mm or more versus less than 600mm, and alloy vs. non-alloy, can fall under different codes with varying rebate rates. Misclassification can result in a denial of the rebate.
- Some high-end steel products (e.g., cold-rolled stainless sheet, electrical steel) have actually seen an increase in the rebate rate to 16%, reinforcing the industry’s “high-end encouragement, low-end restriction” logic.
- Recommendation for exporters: Verify your precise HS code against the 2026A Export Tax Rebate Code Library (available on the State Taxation Administration’s FTP system). Consult a professional customs broker to pre-classify products. Accumulating green production certifications may also streamline rebate processing.
Logistics and Freight
The Baltic Dry Index (BDI) hit a four-month high of 2,675 on April 22, driven by robust Chinese pre-holiday iron ore and steel restocking. Capesize rates rose to USD 39,503/day.
Implications:
- For importers: Rising freight costs add to the landed cost of iron ore and coking coal, reinforcing the raw material cost floor.
- For exporters: Higher bulk freight rates compress FOB-based margins, especially for long-haul shipments to Europe and the Middle East.
Route deviations around the Cape of Good Hope continue to add 10–15 days of voyage time and 15–20% in freight costs for bypassing the Strait of Hormuz. This risk premium should be explicitly factored into quotes for Gulf-bound steel.
Demand Side: Divergence Persists
- Infrastructure investment in Q1 grew 8.9% y/y, with transportation up 16.3%, remaining the steel demand bright spot.
- Property investment fell 11.2%, and new starts dropped 20.3%, though the marginal drag on overall steel demand is waning.
- Manufacturing sectors (auto, appliances, shipbuilding) are holding but showing mixed signals: white goods production remains strong, benefiting CRC/HDG, while auto output has softened.
- Steel exports in the first three months reached 24.72 million tonnes, down 9.9% y/y. Billet exports surged 29%, partially compensating.
Price Outlook and Actionable Recommendations
Short-term outlook (next two weeks):
Prices are likely to hold firm through April 30, with a modest pre-holiday bump of CNY 10–20/t, followed by a quiet holiday week and a normalization in early May. The overall trend into mid-May will hinge on post-holiday inventory data and the tangible scale of mill maintenance. We do not foresee a large directional move unless daily hot metal output drops decisively.
🔴 For Procurement Managers (Buyers)
| Product | Recommendation | Reasoning |
|---|---|---|
| Rebar / Billet | Use the final pre-holiday window to moderately replenish | Post-holiday cost pass-through is likely; lock in volumes before April 30. Do not build heavy inventories due to elevated billet stocks. |
| Hot-rolled coil | Buy on dips; avoid chasing prices | Resistance to high prices is growing; inventory overhang is not fully cleared. |
| Cold-rolled / Galvanized | Normal procurement rhythm | Manufacturing support is solid, but no supply shortage exists. |
| Welded pipes / Tubes | Lock in orders before the holiday | Environmental curbs in May could tighten supply from northern China. |
| Coke | Consider moderately increasing procurement | Supply tightness and new price hike attempts suggest an upswing in May. |
🔵 For Export Sales Managers (Sellers)
| Strategy | Recommendation | Reasoning |
|---|---|---|
| Overall posture | Maintain offers, prioritize closing orders | Price resistance means flexible pricing on a case-by-case basis is necessary to secure post-holiday volumes. |
| EU markets | Focus on high-end specialty and low-carbon steel | Tariffs are doubling and quotas slashing; only differentiated products are competitive. Initiate EPD certification to manage CBAM costs (certificate price: EUR 75.36/t). |
| Southeast Asia | Actively push billets, HRC, pipe | This region is absorbing redirected tonnage; billet export growth trend confirms opportunity. |
| Brazil / South America | Avoid or limit exposure | Quota utilization for CRC/GI is already high; anti-dumping duties in place. |
| Strip steel exports | Continue offering 13% rebate-eligible products | Verify HS codes to ensure correct classification; highlight competitive pricing supported by the retained rebate. |
| Logistics | Warn buyers about rising May freight costs | BDI up 13 sessions in a row; pass through freight adjustment clauses where possible. |
Disclaimer: This report is based on publicly available market information and professional analysis. It does not constitute specific investment or trading advice. All data and judgments are based on market conditions as of April 24, 2026, and may change. Any trading decision should be made independently, considering your own risk tolerance.
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