After the price correction at the end of 2021, the steel market after the festival had a good start, in which the average price of construction steel market increased by 3.17% compared with that before the festival. However, after this wave of price rise, the price rise of steel market tends to slow down, and even weak shocks.
Mysteel data show that as of February 20, the prices of various varieties in China have decreased to varying degrees. Construction steel was hit by the weakness of raw materials, and the cash end profit stopping and stock removal operation was obvious. The exchange of price for quantity led to a sharp decline in the market price. In terms of thread, most regions fell by 110-210 yuan / ton, the national weekly average price fell by 110 yuan / ton, and the decline in wire rod price converged. The market price of hot-rolled coil fell weakly. The average price of 3.0mm hot-rolled coil in 24 major markets in China was 5061 yuan / ton, down 119 yuan / ton from last week; The average price of 4.75mm hot rolled coil was 5007 yuan / ton, down 118 yuan / ton from last week. The price of medium and heavy sector and cold rolled coil fluctuated downward. The price of ordinary sector and manganese sector decreased by 60 yuan / ton compared with last week. The average cold rolling price of 1.0mm this week was 5566 yuan / ton, down 54 yuan / ton month on month. Affected by the decline in the price of raw materials such as iron ore, the blank price fell synchronously, and the market price of profile was mainly callback. Last week, the price of profile fell in the range of 43-66 yuan / ton.
In the general downward trend, the price of seamless pipe increased by 50-100 yuan / ton, becoming a “unique”. As of February 18, the average price of 108 * 4.5mm seamless pipe in 27 major cities in China was 6029 yuan / ton, up 19 yuan / ton from last week.
At present, the steel market is still in a relatively weak state of supply and demand. With the increase of consumption this week and more than half of the construction sites in China have resumed work, the demand is expected to open next week. On February 21, Bbmg Corporation(601992) Zhang Lin, R & D Department of Jidong international trade strategy, said in an interview with the reporter of 21st Century Business Herald: “demand is like opening a blind box. The demand at the stage of resumption of work and production has not begun to pass upward, and the policy benefits in infrastructure have yet to be realized. If the latter is cashed, the impact may continue to the whole first half of the year.”
fluctuation traceability
At present, the situation of low supply and low inventory still exists.
According to the inventory data released by China Iron and Steel Industry Association, in the first ten days of February, the social inventory of five major varieties of steel in 21 cities was 12.36 million tons, an increase of 2.73 million tons month on month, an increase of 28.3%. The increase of steel inventory was expanded compared with the previous period, an increase of 4.48 million tons compared with the beginning of the year, an increase of 56.9%; An increase of 650000 tons over the same period last year, an increase of 5.6%.
Insiders pointed out that in early February, due to the long Spring Festival holiday, the inventory of steel mills and social inventory increased significantly. However, taking construction steel as an example, in the early spring festival of 2022, due to the policies of “carbon peak and carbon neutralization” and “limited production in heating season”, the output of China State Construction Engineering Corporation Limited(601668) steel was at a low level in the same period of previous years. Under the overall contraction of supply, the recovery of construction steel inventory before the Spring Festival this year is far less than that in the same period from 2020 to 2021.
Not long ago, the Ministry of industry and information technology and other departments issued the “14th five year plan” for the development of raw materials industry, which pointed out that by 2025, the production capacity of key raw materials and bulk products such as crude steel and cement will only be reduced but not increased, the capacity utilization rate will remain at a reasonable level, and the comprehensive energy consumption per ton of steel in the iron and steel industry will be reduced by 2%. The establishment of a restraint mechanism to curb the expansion of excess capacity, staggered peak production, strict control of fuel and coal consumption and other measures have put forward higher requirements for the supply side.
On the demand side, the concentrated construction in many places after the festival, coupled with the voice of relevant ministries and commissions to “carry out infrastructure investment moderately in advance”, has played a certain role in driving the market mentality. In Zhang Lin’s view, infrastructure steel can only generate short-term demand, while real estate is the big head of steel. The increment of infrastructure steel may not be enough to fill the reduction of real estate steel. In fact, since late November last year, real estate credit has been relaxed, a new round of steady growth signals have been released, and the market has stabilized and rebounded; However, in the off-season, the demand is weak and the transaction contract shrinks. The market is in the game of strong expectation and weak reality, and the overall operation trend of narrow range shock at the bottom is presented.
It is worth noting that, according to the habit of previous years, businesses will buy steel products at a low price in winter, and then sell these products when consumption recovers in the new year. An iron and steel trader said bluntly: “this year, everyone’s enthusiasm for hoarding is generally not high. Most of them suspend the hoarding plan and choose to wait and see. On the one hand, it is due to the high market price. In addition, under the downward situation of real estate, the expectation of steel consumption is uncertain.”
“After this round of price rise, the price is gradually close to the psychological price of traders, the willingness to ship may gradually increase, and the expected price may become stronger.” Mysteel pointed out: “from the perspective of inventory structure, the proportion of self storage of steel mills this year is slightly higher than that in previous years. They have a greater voice in the price after the festival, or there will be a short ‘unlimited empty rise’. The time and intensity of consumption recovery in the later stage will determine this year’s winter storage.”
peak fall
Thanks to the strict control of steel production at the policy end, China’s steel prices generally maintained a high operating trend in 2021, and the profit performance of the steel industry exceeded expectations.
According to the data of the first three quarters of 2021, China’s key iron and steel enterprises realized a profit of 319.3 billion yuan. The total net profit of 27 smelting iron and Steel Listed Companies in the first three quarters was 104.5 billion yuan, a year-on-year increase of 169.9%. The net profit of many listed steel companies reached a peak level since the historical record, and the last boom period of the steel industry still occurred in 2007.
The fundamental reason for this boom cycle of the iron and steel industry lies in the effective suppression of the production capacity of the iron and steel industry by the central government. The iron and steel industry continues to deepen the supply side structural reform, further consolidate the achievements of iron and steel de production, promote the green and low-carbon transformation of the industry, actively respond to the changes in the demand situation outside China, actively maintain supply and prices, and maintain the safety and stability of the industrial chain and supply chain, The overall operation trend of the industry is good, which has laid a good foundation for the high-quality development of the industry. At the same time, the steel downstream market still maintained a relatively strong demand.
However, in the long run, the iron and steel industry still faces a series of severe challenges. The industrial transformation and industrial upgrading that the iron and steel industry must face under the “carbon peak and carbon neutralization” strategy deserve special attention.
Luo Rongjin, chief analyst of iron and steel industry at ICBC investment bank, said: “The policy side has a direct impact on the iron and steel industry in two aspects: first, after the iron and steel industry is included in the carbon emission quota trading, the carbon emission cost will push up the overall steel production cost, although the rise of this cost is gradual; second, the relevant documents proposed by the national development and Reform Commission put forward specific energy efficiency benchmark levels and benchmark levels for the iron and steel industry, and the transformation and upgrading must be completed within three years The capacity that has completed the transformation will be forcibly eliminated. “
Although it will be extremely difficult for the current steel industry to open up a transformation path to adapt to low-carbon production, Zhang Lin is still optimistic: “policy control is more concentrated on the raw material supply side, and the probability of large-scale production reduction in the steel market in the next year is not high.”
Under the support of the “cross cycle and counter cycle” regulation policy, the above industry insiders believe that China’s steel demand will decline slightly. “China’s apparent demand for steel is expected to be 927 million tons in 2022, a year-on-year decrease of 1.3%.” On the other hand, the world iron and Steel Association predicts that the global steel demand will reach 1.896 billion tons in 2022, with a continuous growth of 2.2%. Therefore, with the recovery of global steel production and the slowdown of steel demand expansion, the overseas steel supply and demand situation will gradually balance, the international market price tends to fall, and China’s steel export price advantage and profit space will be weakened.
“In 2022, the ‘double carbon’ target constraint will continue to restrict the release of steel production capacity and output. The decline of real estate investment and export restrictions will continue to reduce the demand of the steel market. Under the background of two-way tightening of supply and demand, if the price of raw materials remains strong, the steel price can be supported.” Zhang Lin added.
