🔹 Market Overview
Yesterday saw a significant increase in open interest for rebar, with 260,000 contracts added during the day session and another 62,000 contracts overnight. This shows that bearish pressure is strong, but the market only dropped 50 points despite such a large increase in short positions. This “open interest stagnation” indicates growing divergence between bulls and bears, with a potential shift in market momentum.

Today is a key day to determine whether the market will break to new lows or find support for a bottoming out and potential rebound.

🔸 Key Drivers

✅ Bullish Factors:

  • Strengthening Basis: Spot prices for steel remain stronger than futures, indicating that the physical market is holding up well. Steel mills have solid orders and no significant pressure, supporting current prices.

❌ Bearish Factors:

  • Coking Coal Weakness: Coking coal futures dropped 2.57%, and coke fell 2.45% in the overnight session. This weakness continues to drag the entire ferrous complex lower, adding to bearish sentiment.
  • Raw Material Declines: The significant weakness in raw materials suggests that the downward trend could continue, with no immediate signs of reversal.

🌍 Macro Developments

  • Policy and Economic Outlook: The fundamental and policy-driven factors still suggest that the downward trend hasn’t yet ended. There could be another smooth leg down before any significant reversal.
  • Basis Strength: While raw materials are weak, the strength in the basis indicates that the spot market still has support, making a sharp fall less likely in the short term.

📊 Core Concern
There is a 70% chance that the market could break to new lows due to weakening steel demand and continuing raw material price pressure. The battle between bulls and bears is intensifying, and today’s market action will likely determine the next significant move.

⚠️ Outlook for Today
Today is crucial for determining whether the bearish momentum will continue or if a rebound will take place. Watch closely for any signals of bottoming out or further declines, with the odds currently favoring new lows in the short term.

📌 Daily insights provided by LangZo Steel. For reprints, please credit LangZo Steel.