As the Spring Festival is approaching, a new round of cold waves hits, construction sites in the north are greatly affected, steel transactions continue to shrink, inventories continue to rise, the off-season effect gradually deepens, coupled with the impact of the Hebei epidemic black swan, how long can the high steel prices support?
Wang Guoqing, director of the Lange Steel Economic Research Center, said that the market is currently in the off-season in demand. Coupled with the epidemic control, many construction sites in the north have been closed early, and the market is weak, showing a volatile adjustment. The possibility of a sharp decline in the short term is unlikely.
Compared with previous years, steel prices are still at a high level. Taking rebar as an example, the monitoring data of the Lange Steel Cloud Business Platform shows that as of January 20, the average price of Grade 3 rebar (Φ25mm) in the top ten major cities across the country was 4,291 yuan/ton, down 3.6% month-on-month and up 498 year-on-year Yuan/ton, an increase of 13.1%, an increase of 6.6% compared with the same period in 2018, and an increase of 27.5% compared with the same period in 2017.
The prices of other steel products are relatively similar. Compared with the same period of last year, the price is basically 400-1000 yuan/ton, and the price is at a relatively high level. Among them, the price of hot-rolled coil is 4502 yuan/ton, which is still in the past 9 years. The high position.
High prices mean high risks, and steel traders are less willing to store in winter. This year's off-season has been postponed for about half a month. At this time in previous years, the demand in the off-season in winter has fallen, and prices will generally fall. In the coming spring, the demand will rebound and prices will generally rise. Steel traders often use the price difference before and after for winter storage. In 2020, the steel trader's winter storage price is about 3,500 yuan/ton, and this year's price is obviously higher. Compared with the beginning of the year, although the steel price has declined, the overall decline is not large.
There has been an inflection point in inventory, but compared with previous years, the social inventory of steel is still at a low level. According to the monitoring data of the Lange Steel Cloud Business Platform, as of January 15, the social stock of steel was 8.598 million tons, a year-on-year decrease of 670,000 tons, or 7.8%.
Inventories for the whole year of 2020 are at a high level, basically about 30% higher than the same period in 2019. The inventory in March set a record for many years, reaching 23.127 million tons, an increase of about 47% year-on-year. After October, due to relatively strong demand, Inventory has fallen rapidly. As steel prices are currently at a high level, steel traders are not willing to store in winter, resulting in low social inventories.
In terms of cost, the support for steel prices is still relatively large, and the price of raw materials has seen a large increase recently. As of January 19, the Platts Iron Ore Index was US$170.3/ton, which has been operating at a high level of more than US$170 for nearly 10 consecutive days, an increase of US$74.4/ton year-on-year, an increase of 77.6%, or about 481 yuan. The fourteenth round of increase in coke prices has landed, with a cumulative increase of about 800 yuan/ton. The sharp rise in the price of raw materials has greatly pushed up the cost of steel. The cost of molten iron has risen by nearly 600 yuan/ton, and some steel companies have already suffered losses.
In addition, the Hebei epidemic has lasted for more than 10 days, not only boosting the increase in steel inventory, but also raising the cost of steel to a certain extent. During the epidemic, many cities were closed for traffic control. Many vehicles with license plates in Hebei were persuaded to return. The liquidity of steel in northern areas declined, and many construction sites were closed earlier. Terminal demand decreased. Steel transactions in the Beijing-Tianjin-Hebei region experienced a sharp drop. Coupled with the double interference of the cold wave, some companies in the north have been affected in transportation and loading and unloading. Shipping, railway and automobile freight rates have all increased, which has increased production costs.
On the whole, Wang Guoqing said that the off-season effect is gradually showing, and the market is expected to show a phased weakening before the Spring Festival. Judging from the current situation, because the price of raw materials continues to rise, the cost has increased the support for the market. Steel mills use the increase of ex-factory prices to transfer cost pressures, so there is little room for market decline. In general, the domestic steel market will present a wide-ranging turbulence pattern in 2021, the midline of steel prices will move upward, and the room for upside will expand.