Core Viewpoint - The domestic steel market in December 2025 showed a narrow fluctuation with a significant contraction in supply and resilient demand, leading to continuous inventory reduction. The outlook for January 2026 indicates a continuation of the weak supply-demand balance, with seasonal effects from the Spring Festival putting pressure on demand, while supply may see a slight recovery due to improved profitability in steel mills. Overall, steel prices are expected to remain stable within a limited range due to cost support [2][19]. Supply and Production - Both blast furnace and electric arc furnace operating rates have declined. As of December 26, the operating rate for independent electric arc furnaces was 43.64%, down 3.64 percentage points month-on-month and down 7.27 percentage points year-on-year. The operating rate for blast furnaces was 74.76%, down 1.92 percentage points month-on-month but up 1.6 percentage points year-on-year [3]. - Steel production has decreased, with weekly total production of construction steel at 2.9269 million tons, down 1.57 million tons month-on-month and down 5.99% year-on-year. Hot-rolled coil production was 3.5509 million tons, down 0.53% month-on-month and down 2.82% year-on-year [5]. - The reduction in production and maintenance efforts in December were significantly higher than in November, with expectations for a slight easing in maintenance efforts in January [7]. Demand and Consumption - Steel consumption in December showed a slight month-on-month decline, with varied performance across different products. Hot-rolled demand increased by 0.6%, while other products like medium plates and construction materials saw declines of 0.6% and 1.1%, respectively. January's expected procurement volume remains under pressure, with anticipated declines across all product categories [9][11]. - In the construction sector, steel usage in the infrastructure industry decreased by 0.8% in December, with a further expected decline of 1.2% in January. The real estate sector also saw a decrease of 1.2% in December, with a projected decline of 2% in January [11][14]. Inventory and Pricing - Total steel inventory continued to decline in December, although it remains higher than the same period in 2024. As of December 26, the total inventory of construction steel was 5.8754 million tons, down 15.24% month-on-month but up 30.52% year-on-year. Hot-rolled coil inventory was 3.4989 million tons, down 2.85% month-on-month and up 10.87% year-on-year [15][20]. - Profitability for blast furnace steel mills improved in December, with production profits rising to 49 yuan per ton, while electric arc furnace mills continued to incur losses, albeit at a reduced rate [17][18]. Market Outlook - The steel market is expected to maintain a weak supply-demand balance in January 2026, influenced by seasonal demand pressures and uncertainties in export policies. While some steel mills may ease maintenance efforts due to improved profitability, overall production is expected to see a slight recovery. Cost factors are anticipated to provide support, limiting the downward price movement and leading to a likely continuation of range-bound trading [21][22].