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The current domestic steel market prices and upstream cost prices continue to rise, and effective demand continues to grow. Affected by the weather, although social inventories have increased, the market mentality is relatively good; it can be said that the current steel market operating conditions and operating environment are basically good. So, will the domestic steel market price still show an upward trend? The author believes that the current steel market price is already at a relatively suitable level. Although there is still a certain upward momentum and range, it should take into account the unpredictability of the market outlook. It is basically believed that the current round of fluctuations in steel prices is coming to an end. In early August, the domestic steel market prices will gradually peak and enter a relatively stable operating range.
1. The current domestic steel market price hike still exists
1. The strong domestic demand continues to support the recovery of the steel market. At the end of the first quarter, the social inventory of the main steel market was relatively high, while the current social inventory of steel has been greatly reduced. Rebar inventories dropped from 4.07 million tons at the end of March to 3.19 million tons at the end of June. Plate inventories also declined to varying degrees, indicating that the market demand in the second quarter was relatively strong, and the strong effective market demand, while digesting the current output, also The rapid digestion of social inventories has created basic conditions for the upward adjustment of steel market prices. At present, the overall situation of my country's economy is stabilizing and improving. Industrial production picked up faster, and the decline in industrial profits slowed down. According to statistics, in the first half of the year, the added value of industries above designated size increased by 7.0% year-on-year (up 10.7% in June), and the growth rate dropped by 9.3 percentage points from the same period last year. Industrial production and sales are in good condition, and the sales rate of industrial products in the first half of the year was 97.2%. From January to May, the national industrial enterprises above designated size realized profits of 850.2 billion yuan, a year-on-year decrease of 22.9% and a 14.4 percentage point decrease from the decline in the first two months. In addition, investment in fixed assets has grown rapidly. In the first half of the year, the total investment in fixed assets of the whole society was 9132.1 billion yuan, a year-on-year increase of 33.5%, and the growth rate was 7.2 percentage points higher than the same period last year. Among them, urban fixed asset investment was 789.8 billion yuan, an increase of 33.6% (35.3% in June), an acceleration of 6.8 percentage points; rural fixed asset investment was 1322.3 billion yuan, an increase of 32.7%, an acceleration of 9.5 percentage points. With the improvement of the domestic economy, market demand has gradually picked up, providing support for the rise in steel prices.
2. The rise in international market prices has created a good external environment for the domestic market. With the current economic recovery in emerging markets, the demand for steel will continue to grow, while steel stocks in developed economies in Europe and the United States continue to decline. After the bottoming is over, downstream industries such as the real estate and automotive industries have begun to increase purchases and replenish inventory. The increase in demand has caused international steel prices to continue to rise recently. This is the 11th consecutive week that prices have risen since the first week of May. The current CRU steel composite price index is 147 points, an increase of 20.5 points or 16.2% from the lowest value so far this year. The long product and sheet steel price indices are 161.9 points and 139.7 points, respectively, up 6.3% and 22.9% from the lowest value. The rise in international steel prices has driven up the price of domestic steel exports, and has also promoted the rise of prices in the domestic market.
3. The increase in ex-factory prices has become one of the driving forces for price increases. According to Baosteel’s latest price adjustment policy, the ex-factory prices of major products such as hot coil, cold rolled, galvanized, and silicon steel in August will be increased by 350-500 yuan/ton (before tax) on the basis of July. SPHC3.0mm hot coil will be implemented after the adjustment. The price is 4042 yuan/ton (before tax), SPCC1.0mm cold coil is 4776 yuan/ton (before tax), and DC01 cold coil is 100 yuan/ton high. As a result, the ex-factory prices of Baosteel's main plate products have been increased by 550-1050 yuan/ton cumulatively within two months. Baosteel's August ex-factory price increase will also drive up the ex-factory prices of other steel mills. On July 22, Shougang issued a price policy for some products in August, and Laiwu Steel, Shagang and Shaogang also raised their ex-factory prices. The ex-factory price of Shougang's hot-rolled coils is increased by 350 yuan/ton, and the price of main hot-rolled products is increased to 4,210 yuan/ton; the ex-factory price of cold-rolled coils is increased by 500 yuan/ton, and the ex-factory price of main cold-rolled coils is increased to 5,250 yuan/ton; galvanized sheet is also increased Cost 500 yuan/ton. The ex-factory price of Laiwu Steel Hot Coil is also raised by 100 yuan/ton based on mid-July, and the current local ex-factory price of 5.5mm*1250*C carbon hot-rolled coil in Laiwu is 3930 yuan/ton. Shagang has also issued a building material price policy in late July. On the basis of mid-July, the price of rebar increased by 160 yuan/ton, and the price of ordinary wire rose by 150 yuan/ton. Shaoguan Iron and Steel also raised the ex-factory price of ordinary carbon high-speed wire by 50 yuan/ton, and the execution price of main products was 4,050 yuan/ton; the ex-factory price of round steel and rebar was raised by 50 yuan/ton, and the execution price was 4,080 yuan/ton. As steel mills frequently increase the ex-factory prices of steel products, traders’ purchase costs have increased, and the purchase prices of resources put on the market later are generally high, and market prices are unlikely to fall sharply.
It is expected that the domestic steel market prices will gradually peak in the near future, and the upward momentum will end in early August. On the one hand, the release of domestic production capacity is relatively rapid, but from another perspective, it is necessary for the steel market price to adjust appropriately after the continuous rise, because this is conducive to the release of market risks and is more conducive to the price of steel market. Within its relatively reasonable value range, there are regular narrow fluctuations.
2. For the domestic steel market, pressure on resource supply still exists
Although there has been a good momentum of rising demand and prices in the steel market recently, the high domestic production level still puts greater pressure on the market. According to statistics from the National Bureau of Statistics, my country’s crude steel and steel output in June were 49.42 million tons and 61.62 million tons, an increase of 6% and 14% year-on-year respectively; the average daily output was 1.6473 million tons and 2.054 million tons, respectively, an increase from the previous month. 9.9% and 11.1% are both record highs. In the first half of this year, my country's crude steel and steel output were 266.58 million tons and 316.48 million tons, an increase of 1.2% and 5.7% year-on-year. In particular, hot-rolled coils, medium plates, and other types of plate products, the market presents an obvious situation of oversupply. Although the demand for long products such as rebar and wire rod has been increased by investment, as the production capacity of small and medium-sized enterprises continues to recover and release, the balance of supply and demand is very unstable. According to statistics from the International Steel Association, the average daily output of crude steel worldwide in June was 3.328 million tons, an increase of 7.6% month-on-month, the highest level since October 2008. Even excluding China, the average daily global crude steel output in June reached 1.68 million tons, an increase of 5.3% month-on-month, the highest level since December 2008. The rebound in global crude steel production is not conducive to my country's expansion of exports.
3. In the process of rapid increase in market prices, price bubbles are likely to form, and a large number of low-priced products are deposited, which gradually increases market risks.
The building materials market represented by wire rods and threaded rods first stabilized in April, and then the steel market prices rebounded. Especially in July, after steel mills substantially increased the ex-factory prices of various steel products, the national steel market prices rose across the board. In the process of rapid rise in market prices, price bubbles are likely to form, and a large number of low-priced products will gradually increase market risks and increase the probability of price declines in the future. Take 1.0 mm cold-rolled sheet as an example, the price before the increase (April 10) was 4,212 yuan/ton, and the current price is 5130 yuan/ton, an increase of 918 yuan per ton, of which 745 per ton in June and July Yuan, accounting for 81% of the total increase; the market prices of hot-rolled coil (3.0 mm) and plate (20mm) also accounted for 66 and 75% of the total increase, respectively. Wire rod and rebar accounted for a slightly smaller proportion, and also accounted for nearly 62% of the total increase. The current market inventory resource cost and market price have already opened up a larger profit margin, and it is inevitable that the phenomenon of cashing out and making a profit from the warehouse is inevitable. (Contributed by China United Steel Network)