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July and August, traditionally off-peak seasons for the steel industry, see a further weakening of demand despite potential macroeconomic boosts such as important session and interest rate cuts. Since July, persistent declines in demand have worsened the severe supply-demand imbalance, with anticipated benefits from policy changes falling short. The switch from old to new national rebar standards intensified irrational selling, increasing market anxiety. Recent disappointing US non-farm data and recession fears caused turmoil in global commodity and stock markets, impacting China’s steel sector. This ongoing decline deepened steel mill losses, leading to more production cuts.
However, August’s routine blast furnace maintenance may not be enough to rebalance supply and demand. In August, there is limited room for improvement in steel demand. However, the accelerated issuance of special bonds was expected to generate physical work volume, potentially boosting demand in September. Despite a challenging first half of the year, steel mills are holding onto hopes for the traditional peak seasons of September and October. A large-scale production cut before these peak periods would not align with typical market dynamics. Therefore, predictions for production cuts remain cautious. While August may see a temporary rebound due to oversold conditions, the extent of any recovery will depend on how quickly and effectively inventories are consumed.