Supply shrinks, demand recovers, and the steel market after the Spring Festival is booming. Affected by factors such as strong demand superimposed on production restrictions, steel prices continue to rise, and there is a tendency for the “bull” to change.
Industry insiders pointed out that steel prices are expected to remain high in the next few months, and there may even be room for growth.
Accelerated demand growth leads to rising prices
Looking at the recent sharp rise in the steel industry, factors such as’containing production and improving efficiency; strong raw materials, supporting steel prices; expanding domestic demand and improving transactions’ have led the steel market to record new highs.
According to reports, my country has completed the “13th Five-Year” steel industry target of 150 million tons of capacity reduction two years ahead of schedule, and has withdrawn from “zombie companies” with a total of 64.74 million tons of crude steel. According to incomplete statistics, during the “Thirteenth Five-Year Plan” period, the cumulative capacity reduction reached 20834 million tons, exceeding the task. On this basis, continue to promote relevant places to increase capacity reduction efforts, prohibit new steel production capacity, suspend capacity replacement and project filing, and continue to consolidate the results of capacity reduction.
In 2021, the beginning of the “14th Five-Year Plan” period, the weekly capacity utilization rate is currently controlled at about 77%. It is expected that the steel industry will continue to deepen the supply-side structural reform as the main line, consolidate and improve the results of steel decapacity work, and continue to promote the steel industry Change from big to strong. On the other hand, judging from the inventory of imported sintered ore from steel mills, the current inventory level is significantly lower than before the Spring Festival, indicating that the demand for replenishment of steel mills in March will still exist, which is good for ore prices and supports steel prices.
It is understood that the national building materials transaction volume data in the past year show that the market transaction volume has rebounded significantly after the Spring Festival in 2021, but the transaction growth rate has not accelerated significantly. March is a traditional month as a link between the first and second quarters. The peak season for building materials “Golden Three Silver Four” begins, so the demand growth rate in March may have new growth points, and it will continue to be stable.
According to industry insiders, there are short-term negative factors, which are mainly reflected in the excessively rapid increase in steel prices after the Spring Festival, which has caused winter storage traders to start shipping quickly. Although transactions have begun to increase in volume, overall demand has not yet fully started. . In addition, some areas of North China and East China have cold springs, which may delay the start of some markets. In addition, the growth rate of savings is also significantly faster than that of residents’ disposable income, while the growth rate of consumption is much lower than expected.
But in the long run, only by expanding domestic demand, stimulating consumption growth potential, and creating new demand can the stability and sustainability of China’s economic growth be enhanced. Therefore, between the beginning of the “14th Five-Year Plan” in 2021, demand growth may accelerate significantly, mainly reflected in the growth of infrastructure and the consumer market, while the real estate market may maintain steady growth. As the general direction of the macro market is basically set, the global capital easing is in general trend; and the overall volume growth rate of the bulk commodity market is still slowing down.
“It is expected that the steel market in 2021 may go ‘bull’, and the upward trend will be the main one,” said an insider.
Is the market short-lived or sustainable
“It’s not difficult to find subdivided varieties. The future price trend of steel products will be dominated by strong fluctuations.” Industry insiders said.
Taking rebar as an example, as downstream terminals continue to start construction and demand is further released, the inventory situation will continue to improve; however, the rapid increase in prices after the holiday has also led to fear of heights in the market. It is expected that the price of wire spirals will fluctuate at a high level. .
For cold and hot rolled coils, since iron ore prices have a downward trend after the holiday, they are still high. In the short term, merchants have a strong willingness to stand up for the price, and support on the cost side is still strong, and the fundamentals of a strong trend of supply stability and demand are superimposed. Therefore, prices still have room to rise in the short term. The main risk of steel prices lies in the rapid rise of prices after the holiday. The downstream acceptance requires a process. Coupled with the willingness of profitable resources to cash out, the price may still be adjusted. It is expected that the prices of hot and cold coils will mainly fluctuate.
For stainless steel, nickel, which is one of the main components, has accumulated risks due to its early price increase. It is now in a callback stage, but the overall outlook is good, and it is still strong in the medium and long term. Although the accumulation of stainless steel during the Spring Festival is relatively large, it is an annual Spring Festival practice. This year, the accumulation of 300 series stainless steel during the Spring Festival is not as good as in previous years. Downstream companies stock less before the holiday and are currently in a low inventory state. With the recovery of downstream consumption of stainless steel after the festival , The demand for replenishment is superimposed on the traditional consumption peak season, and the demand for stainless steel is expected to be optimistic. The price of 304 stainless steel may still perform strongly. However, nickel is currently in a callback phase, and stainless steel may have limited continued upward momentum. It is expected that the short-term high volatility will be strong.
Through the supply-side structural reforms in the past few years, in terms of current market performance, the steel market seems to have emerged from the haze of high inventories and cabbage prices. Take the private Jingye Iron and Steel Co., Ltd. located in Pingshan County, Hebei Province as an example. In 2020, it will realize profits and taxes of 3.9 billion yuan, accounting for more than 70% of Pingshan County’s taxes.
And this kind of “bull” market, is it short-lived, or is it a glimmer, can it be sustainable?
In this regard, relevant agencies pointed out that due to policies such as carbon peaking and carbon neutrality during the “14th Five-Year Plan” period, which may have a profound impact on the steel industry, the steel industry may face a new round of “supply-side reforms.” On the one hand, it will accelerate the improvement of production processes, update equipment and use low-carbon energy in the steel industry; on the other hand, it will encourage steel companies to actively innovate and develop deep decarbonization technologies. In the wave of low-carbon transformation, small and medium-sized enterprises with high energy consumption and low efficiency will be eliminated, and enterprises will follow the path of low-carbon innovation, and market competitiveness will be further enhanced.
Post time: Apr-07-2021