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The current domestic steel market prices and upstream cost prices both continue to rise, and effective demand continues to grow. Due to weather conditions, although social inventories have increased, the market mentality is relatively good; It can be said that the current conditions and operating environment of the steel market are basically good. So, will the domestic steel market prices continue to rise? The author believes that the current steel market prices are already at a relatively suitable level. Although there is still some upward momentum and magnitude, taking into account various unpredictable variables that may arise in the future, it is basically believed that the current round of steel price fluctuations and upward adjustments 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 driving force for the current domestic steel market price increase 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 major steel markets was relatively high, and the current social inventory of steel has been significantly reduced. The inventory of rebar decreased from 4.07 million tons at the end of March to 3.19 million tons at the end of June, and the inventory of sheet metal also decreased to varying degrees, indicating that the market demand in the second quarter was relatively strong. The strong market effective demand not only digested the current production, but also quickly digested the social inventory, creating basic conditions for the upward adjustment of steel market prices. At present, the overall situation of China's economy is stabilizing and improving. Industrial production is accelerating its recovery, and the decline in industrial profits is slowing down. According to statistics, in the first half of the year, the added value of industrial enterprises above designated size increased by 7.0% year-on-year (up 10.7% in June), with a growth rate 9.3 percentage points lower than the same period last year. The connection between industrial production and sales is good, with a sales rate of 97.2% for industrial products in the first half of the year. From January to May, industrial enterprises above designated size in China achieved a profit of 850.2 billion yuan, a year-on-year decrease of 22.9%, which is 14.4 percentage points lower than the decline in January and February. In addition, fixed assets investment grew rapidly. In the first half of the year, the whole society's fixed assets investment was 9132.1 billion yuan, up 33.5% year on year, 7.2 percentage points faster than the same period last year. Among them, urban fixed assets investment was 7809.8 billion yuan, up 33.6% (35.3% in June), 6.8 percentage points faster; Rural fixed assets investment was 1322.3 billion yuan, up 32.7%, 9.5 percentage points faster. With the improvement of the domestic economy, market demand has gradually rebounded, providing support for the rise in steel prices.
 

2. The rise in international market prices has created a favorable external environment for the domestic market. The current economic recovery in emerging markets will continue to increase demand for steel, while steel inventories in developed economies in Europe and America continue to decline. Downstream industries such as the real estate and automotive industries have begun to increase procurement and replenish inventory after bottoming out. The amplification of demand has led to a continued upward trend in international steel prices in recent times. This is the 11th consecutive week of price increase since the first week of May when prices shifted from decline to rise. At present, the comprehensive price index of CRU steel is 147 points, an increase of 20.5 points or 16.2% from the lowest value this year. The price indices of long steel and sheet metal are 161.9 points and 139.7 points, respectively, an increase of 6.3% and 22.9% from the lowest value. The rise in international steel prices has driven up domestic steel export prices and also contributed to the increase in domestic market prices.

3. The increase in factory prices has become one of the driving forces behind price increases. According to the latest price adjustment policy of Baosteel, the ex factory prices of hot coil, cold roll, galvanized steel, silicon steel and other major varieties in August were increased by 350-500 yuan/ton (before tax) on the basis of July. After adjustment, the executive price of SPHC3.0mm hot coil was 4042 yuan/ton (before tax), the SPCC1.0mm cold coil was 4776 yuan/ton (before tax), and the DC01 cold coil was 100 yuan/ton higher. As a result, the ex factory prices of Baosteel's main sheet metal varieties have cumulatively increased by 550-1050 yuan/ton within two months. Baosteel's factory price increase in August will also drive up the factory prices of other steel mills. On July 22nd, Shougang issued price policies for some products in August, and Laigang, Shagang, Shaogang and other companies also raised their ex factory prices. The ex factory price of Shougang hot-rolled coils has been raised by 350 yuan/ton, with the main hot coil products priced at 4210 yuan/ton; Cold coil has increased by 500 yuan/ton, and the factory price of mainly cold-rolled coils is 5250 yuan/ton; Galvanized sheet has also increased by 500 yuan/ton. The ex factory price of Laiwu Iron and Steel's hot-rolled coil has also been increased by 100 yuan/ton based on mid July. Currently, the local ex factory price of 5.5mm * 1250 * C ordinary carbon hot-rolled coil in Laiwu is 3930 yuan/ton. Shagang has also introduced a building materials price policy for late July. Based on mid July, the price of rebar has increased by 160 yuan/ton, and the price of regular steel has increased by 150 yuan/ton. Shaogang will also raise the ex factory price of ordinary carbon high wire by 50 yuan/ton, and the execution price of its main products will be 4050 yuan/ton; The ex factory prices of round steel and threaded steel have been raised by 50 yuan/ton, and the execution price is 4080 yuan/ton. Due to the frequent increase in ex factory steel prices by steel mills, the procurement costs of traders have increased, and the purchase prices for later market resources are generally high, making it impossible for market prices to fall significantly.

It is expected that the domestic steel market prices will gradually peak in the near future, and the upward trend will end in early August. On the one hand, domestic production capacity is released quickly, but from another perspective, it is necessary for the steel market price to adjust and consolidate appropriately after continuous surges, because this is conducive to the release of market risks and more conducive to the steel market price to fluctuate within its relatively reasonable value range in a regular and narrow range.
 

2、 For the domestic steel market, the pressure of resource supply still exists

Although there has been a good trend of rising demand and prices in the steel market recently, the relatively high production level in China still puts significant pressure on the market. According to statistics from the National Bureau of Statistics, China's crude steel and steel production in June were 49.42 million tons and 61.62 million tons, respectively, an increase of 6% and 14% year-on-year; The daily average production was 1.6473 million tons and 2.054 million tons respectively, with a month on month increase of 9.9% and 11.1%, both reaching historical highs. In the first half of this year, China's crude steel and steel production were 266.58 million tons and 316.48 million tons respectively, an increase of 1.2% and 5.7% year-on-year. Especially for sheet metal varieties such as hot-rolled coils and medium plates, there is a clear oversupply situation in the market. Although the demand for products such as rebar and wire rods has increased due to investment, the supply-demand balance is very unstable as the production capacity of small and medium-sized enterprises continues to recover and release. According to statistics from the International Steel Association, the global daily crude steel production in June was 3.328 million tons, a month on month increase of 7.6%, the highest level since October 2008. Even excluding China, the global daily crude steel production in June reached 1.68 million tons, a month on month increase of 5.3%, the highest level since December 2008. The rebound in global crude steel production is not conducive to China's expansion of exports.

3、 In the process of rapid rise of market price, it is easy to form a price foam, and a large number of low price products precipitate, which makes the market risk gradually increase.

The building materials market, represented by wire and thread, stabilized first in April, followed by a comprehensive rebound in steel market prices. Especially in July, after steel mills significantly raised the ex factory prices of various steel varieties, the national steel market prices saw a comprehensive increase. In the process of rapid rise of market price, it is easy to form a price foam. A large number of low price products precipitate, which gradually increases the market risk and increases the probability of future price decline. Taking 1.0 mm cold-rolled sheet as an example, the price before the increase (April 10th) was 4212 yuan/ton, and the current price is 5130 yuan/ton, with an increase of 918 yuan/ton. Among them, the price increased by 745 yuan/ton in June and July, accounting for 81 percentage points of the total increase; The market prices of hot-rolled coils (3.0 mm) and medium thick plates (20mm) also accounted for 66 and 75 percentage points of the total increase, respectively. The proportion of wire and threaded steel is slightly small, accounting for nearly 62 percentage points of the total increase. The current market inventory resource cost and market price have opened up a large profit margin, and the phenomenon of selling goods for cash and making profits from stock out is inevitable.