The peak demand season is approaching, can steel prices continue to rise?

After the steel price has experienced a surge and correction, it has moved forward in shock. At present, it is approaching the peak season of traditional steel demand of “gold three silver four”, can the market usher in a rising tide again? On February 24, the average price of grade 3 rebar (Φ25mm) in ten major domestic cities was 4,858 yuan/ton, down 144 yuan/ton or 2.88% from the highest point in the year; but up 226 yuan/ton compared with the same period last year , an increase of 4.88%.

Inventory

Starting from the end of 2021, fiscal and monetary policies will continue to be loose, and the real estate industry will blow hot air frequently, which greatly increases the market’s overall expectations for steel demand in the first half of 2022. Therefore, starting from January this year, the price of steel has continued to rise, and the price of steel has remained high even at the “winter storage” node; this has also led to the low enthusiasm of traders for “winter storage” and the overall low storage capacity. .​​

Up to now, the overall social inventory is still at a low level. On February 18, the social inventory of steel in 29 key cities across the country was 15.823 million tons, an increase of 1.153 million tons or 7.86% over the previous week; compared with the same period in the 2021 lunar calendar, it decreased by 3.924 million tons, a decrease of 19.87 tons. %.​​

At the same time, the current steel mill inventory pressure is not great. According to data from the China Iron and Steel Association, in mid-February 2022, the steel inventory of key iron and steel enterprises was 16.9035 million tons, an increase of 49,500 tons or 0.29% over the previous ten days; a decrease of 643,800 tons or 3.67% over the same period last year . Steel inventories that continue to be at a low level will form a certain support for steel prices.

Production

Corresponding to low inventories is also low production. In 2021, the Ministry of Industry and Information Technology has repeatedly emphasized the reduction of crude steel production. In the second half of last year, many places across the country issued production restrictions and production suspension notices in order to complete the production reduction target. With the implementation of relevant policies, the national steel production has dropped significantly. The national steel production reached the lowest level in October and November, and the national average daily production of crude steel dropped to about 2.3 million tons, down about 95% from the peak in 2021. tons.​​

After entering 2022, although the country no longer regards the reduction of crude steel production as a rigid requirement, the overall steel production in January did not surge as expected. The reason is not unrelated to the fact that some regions are still in the limited production period in autumn and winter and the Winter Olympics are held. According to statistics from the China Iron and Steel Association, in mid-February 2022, key steel enterprises produced a total of 18.989 million tons of crude steel and 18.0902 million tons of steel. The daily output of crude steel was 1.8989 million tons, down 1.28% from the previous month; the daily output of steel was 1.809 million tons, down 0.06% from the previous month.

demand side

With the continuous improvement of relevant policies, the recovery potential of market demand is also increasing. Under the national policy of “seeking progress while maintaining stability”, infrastructure investment may become one of the main focus points. According to incomplete statistics from relevant institutions, as of February 22, 12 provinces including Shandong, Beijing, Hebei, Jiangsu, Shanghai, Guizhou and the Chengdu-Chongqing region have released a list of investment plans for key projects in 2022, with a total of 19,343 projects. The total investment amounted to at least 25 trillion yuan.​​

In addition, as of February 8, 511.4 billion yuan of new special bonds had been issued during the year, completing 35% of the new special debt limit (1.46 trillion yuan) issued in advance. Industry insiders said that this year’s new special bond issuance has completed 35% of the pre-approved quota, which is higher than the same period last year.

Can steel prices usher in a rising tide in March?​​

So, can steel prices usher in a rising tide in March? From the current point of view, under the condition that demand and production are not recovering quickly, the room for price rises and falls is relatively limited. It is expected that before the end of March, the domestic construction steel market price may fluctuate at the current price level. In the later stage, we need to focus on the recovery of production and the actual fulfillment of demand.


Post time: Mar-08-2022