Factors affecting steel prices

 

The Financial Committee makes a significant statement! Actively introducing market-friendly policies

 

On March 16, the State Council Financial Stability Development Committee held a special meeting to study the current economic situation and capital market issues. The meeting was chaired by Liu He, a member of the Political Bureau of the CPC Central Committee, Vice Premier of the State Council, and Director of the Financial Committee, with responsible comrades from relevant departments attending the meeting.

Analyst's view: Influenced by the meeting, the market's bullish sentiment has increased, which is beneficial for the macro economy, leading to an increase in buying in the trading market and pushing prices up.

 

National Bureau of Statistics: In February, the sales prices of commercial residential properties in first-tier cities rose month-on-month.

 

In February, among 70 large and medium-sized cities, 27 cities saw new home prices rise month-on-month. The sales prices of new commercial residential properties in first-tier cities rose by 0.5% month-on-month, a decrease of 0.1 percentage points from the previous month, with Beijing, Shanghai, Guangzhou, and Shenzhen rising by 0.6%, 0.5%, 0.6%, and 0.4% respectively; second-hand residential prices in first-tier cities rose by 0.5% month-on-month, an increase of 0.4 percentage points from the previous month, with Beijing, Shanghai, and Guangzhou rising by 0.7%, 0.9%, and 0.6%, while Shenzhen fell by 0.2%. The sales prices of new commercial residential properties in second-tier cities remained flat after rising by 0.1% last month.

Analyst's view: From the trend of housing prices in February, the demand for housing in first-tier cities is steadily growing, confidence in the real estate market has somewhat recovered, and the speed of capital returning to real estate is accelerating, which will also drive real estate development, increase demand for building materials, and be beneficial for medium to long-term steel prices.

 

From January to February, key steel enterprises produced a total of 12,376,870 tons of crude steel, a year-on-year decrease of 10%.

 

In January and February 2022, the national cumulative production of crude steel was 15,796,000 tons, with an average daily output of 2,677,300 tons, a year-on-year decrease of 10.0%; pig iron production was 13,213,000 tons, with an average daily output of 2,239,500 tons, a year-on-year decrease of 10.80%; steel production was 19,671,000 tons, with an average daily output of 3,334,100 tons, a year-on-year decrease of 6.0%. From January to February, key statistical steel enterprises produced a total of 12,376,870 tons of crude steel, a year-on-year decrease of 12.07%, with a cumulative daily output of 2,097,800 tons; pig iron production was 10,912,360 tons, a year-on-year decrease of 11.49%, with a cumulative daily output of 1,849,600 tons; steel production was 11,931,450 tons, a year-on-year decrease of 10.18%, with a cumulative daily output of 2,022,300 tons.

Analyst's view: From the data, the supply of crude steel and steel has decreased, supply is tight while demand is steadily growing, this increase and decrease will enhance the price control ability of steel sellers, thereby pushing steel prices up.

 

Iron ore port prices fluctuate.

 

According to the domestic import iron ore spot quotes on March 16, prices at Qingdao Port generally fell by 10-30 yuan/ton, with 61% PB powder down 30 to 910 yuan/ton, 58% Australian powder down 20 to 800 yuan/ton, 62.5% Brazilian powder down 20 to 1020 yuan/ton, and 65% Brazilian powder down 10 to 1130 yuan/ton; at Tianjin Port, prices generally rose by 10 yuan/ton, with 61% PB powder up 10 to 975 yuan/ton, PB lump ore up 10 to 1310 yuan/ton, 62.5% Brazilian powder up 10 to 1080 yuan/ton, and 65% Brazilian powder up 10 to 1190 yuan/ton.

Analyst's view: The polarization of iron ore prices indicates that the market's bullish and bearish battles remain intense. The state controls raw material prices and increases domestic iron ore mining to buffer the price shocks caused by insufficient international supply. As international ore prices remain high, many traders are turning to cheaper domestic iron ore, leading to increased domestic iron ore demand and rising prices.

 

 

Market prices

Steel prices rose on the 16th, with some declines.

 

RebarAmong 24 markets, 9 rose by 10-40, 1 fell by 10, with the average price of 20mm HRB400E at 4878 yuan/ton, an increase of 8 yuan/ton from the previous trading day.

Hot rolledAmong 24 markets, 15 rose by 10-70, 3 fell by 10-40, with the average price of 4.75 hot rolled coil at 5102 yuan/ton, an increase of 23 yuan/ton from the previous trading day.

Medium and heavy platesAmong 23 markets, 8 rose by 10-30, 3 fell by 30-50, with the average price of 14-20mm common medium plate at 5186 yuan/ton, an increase of 3 yuan/ton from the previous trading day.

16On the 16th, 23 steel mills adjusted prices, among which:

5 raised prices, accounting for 21.7%, with an adjustment range of 10-20 yuan/ton, the highest increase being Shougang Changzhi Building Materials;

8 lowered prices, accounting for 34.8%, with an adjustment range of 20-100 yuan/ton, the largest decrease being Shandong Chuan Yang profiles;

10 remained unchanged, accounting for 43.5%.

On the 16th, some common billet resources in Tangshan Qian'an rose by 40 to 4660 including tax ex-factory.

 

 

Futures steel prices rose sharply on the 16th.

 

On the 16th, rebar main futures rose by 153, closing at 4904, an increase of 3.22%; hot rolled main futures rose by 128, closing at 5080, an increase of 2.58%; coking coal main futures rose by 90.5, closing at 2917, an increase of 3.2%; coke main futures rose by 72, closing at 3548.5, an increase of 2.07%; iron ore main futures rose by 39.5, closing at 804, an increase of 5.17%.

 

Steel price forecast:

Supply and demand aspects:Due to the impact of the epidemic, manufacturers' supply has decreased, and supply is relatively reduced, while downstream demand is also affected by logistics issues, with many uncertainties. Traders in epidemic areas tend to adopt a wait-and-see attitude in the short term. On the other hand, according to real estate data, the transaction prices in first-tier cities showed a significant rebound in February, indicating an increase in market demand, which will drive real estate developers' confidence in land acquisition and construction, leading to an increase in steel procurement in the future, which is beneficial for steel prices.

Cost aspects:As overseas iron ore prices remain high, iron ore prices are gradually becoming "polarized". The demand for iron ore is gradually shifting from abroad to domestically, with port price growth slowing and domestic prices rapidly following.
From the futures market perspective, current prices are at the lower end of the rising channel, with clear support, and future prices are expected to run strongly.

Therefore, steel prices are expected to rise, with an increase of around 50.