The steel market saw a slight cooling today. In the morning, a few markets saw a decline of 10-20 yuan in rebar and hot rolled coil prices, but some markets rebounded in the afternoon to recover the morning losses. Cold-rolled, galvanized, medium plate, seamless pipe varieties remained stable, while angle steel and channel steel saw a slight increase of 10-20 yuan in some areas.

Overall, the market trading remained weak with some steel traders in the construction sector not actively shipping due to the difficulty in securing low-cost resources after shipping. This is mainly because purchasing prices from steel mills are too high after the price hike, resulting in very small profit margins.

This afternoon, mainstream steel mills in Shandong and Hebei provinces announced a reduction of 100-110 yuan per ton in coking coal prices, marking the successful implementation of the first round of coking coal price reductions initiated by the steel companies. Based on the current supply and demand situation in the coking coal market, it is predicted that steel companies will take advantage of this opportunity to launch another round of price reductions, further reducing production costs.

Recent developments such as night shifts resuming in the Lvliang area and the energy bureau in Shanxi Province holding a meeting on improving coal mine quality and efficiency indicate an increase in coal production. With expectations of increased production, market sentiment has turned pessimistic, leading to a rise in auction failure rates: the auction failure rate of coking coal after May 1st increased by 30% compared to April. As a result of accelerated production in coke plants, coking coal inventories have replenished to last year's levels, reducing the need for replenishing stocks.

It is worth noting that iron ore futures in Singapore have exceeded the $120 mark again for the first time since March this year. The last time it touched the $120 mark was on May 6th but failed to hold steady, dropping to around $113. 

Influence by this, Dalian iron ore returned above the 900 yuan mark, closing at a three-month high. The iron ore price is highly elastic, relying on capital to drive it. Without a significant increase in pig iron output, there is limited space for further price increases.

The recent rise in iron ore prices is closely related to capital speculation. However, as pig iron production is expected to peak soon and with the disappearance of fundamental support, the upward momentum of iron ore prices will be greatly restricted. It is expected that iron ore prices will face pressure around 950 yuan both on the futures market and in the spot market.

This afternoon, Shagang raised its scrap steel purchase price by 50 yuan per ton, with some billet prices rising by 50-80 yuan per ton, effective from tomorrow.

In recent times, a series of macro policies combined with good steel production and sales data last week have boosted the steel market, resulting in increased profits for steel mills and a recovery in the economic efficiency of scrap steel. This has led to high enthusiasm for scrap steel purchases. With reverse invoicing and environmental inspections in some areas affecting supply, the reduced supply of scrap steel in many places is beneficial to the current scrap steel prices. It is expected that scrap steel prices will continue to remain strong in the short term and may see a slight increase.

The current steel market expectation is strong but the reality is weak, leading to difficulties in downward movements in the market. The spot market is relatively weak in following the upward trends. Both steel mills and steel traders have very limited profit margins, and the market continues to struggle in a game of rising prices.

In the short term, the surge in gold, silver, and copper under the influence of macro policies and inflation has not subsided, the basis difference between futures and spot markets has not significantly widened, and the differentiation is not clear. Therefore, there is a possibility of a slight increase in market prices with a widening gap between futures and spot prices.

Currently, steel mills face relatively low inventory pressure, coupled with favorable policy support, leading to recent price adjustments predominantly towards the higher end from mainstream steel mills. However, high-priced transactions in the steel spot market are mediocre, combined with the successful implementation of the first round of coking coal price cuts and increasing market wait-and-see sentiment, making steel price increases weak. In the short term, steel prices are expected to fluctuate at high levels.