Exclusive: Can China's Steel Market Enter the Spring in April?

In the down channel of steel prices, the Japanese earthquake has been difficult to boost the steel market. On March 28, perhaps under the “temptation” of 60 yuan/ton for Tangshan Billet weekend, the steel market once again ushered in a wave of “warm spring” prices. The rise in steel prices and the slight increase in demand have led some traders to look forward to the "reverse steel prices can be reversed." However, it is not consistent with the industry's view that whether the steel market can enter 'spring in April' as scheduled.

Demand for steel prices rose slightly

On March 28th (Monday), the domestic steel price suddenly changed the downtrend after the Spring Festival and suddenly went out of a wave of rising prices. According to the mysteel market quotation, on the 28th and 29th, domestic hot rolling, building materials and other markets have seen different degrees of gains. Within two days, the average price of Φ20mmHRB335 rebar in 25 major markets across the country rose by 38 yuan per ton compared with the 25th. The average price of 3.0mm hot coils in 24 major markets across the country was higher than that of 25th, which was a rise of 16 yuan per ton.

According to market feedback, the downstream demand of the steel market has a certain degree of heavy volume due to the influence of buying and buying. “According to the trend of the calendar year, from March to March, it was the peak sales season for steel products. However, because steel prices are relatively high compared to previous years, downstream steel companies are afraid to take risks. They were previously purchased on-demand and had zero inventory operations. Therefore, from this year, Since the Spring Festival, now that steel prices have continued to fall, traders have more or less inventories on hand. The rise in steel prices may stimulate downstream steel demand and bring the historic peak demand of the steel market." The main cold-rolled trader in northeastern China stated this way.

According to feedback from Northeast traders, due to the influence of weather factors in Northeast China, the Northeast market has only 2-4 waves of real sales season in a year. Among them, March to March of each year is one of the few sales seasons among Northeast traders. Based on this, many traders in Northeast China are generally optimistic about the market outlook.

According to the survey of mysteel market, the feedback from various localities on this price increase is inconsistent. In some markets, there has been a slight outbreak of demand for downstream steel companies. In some markets, trading by intermediate traders has been pushed up, but Most traders and downstream steel companies are currently on a wait-and-see attitude toward this wave.

Billet price increase or inducement

For the rise of steel prices this time, traders generally expressed surprise. It is reported that the news of the previous earthquake in Japan did not bring about a complete reversal of steel prices, and the current steel market lacks major positive news.

Some traders said that the rise in prices at Tangshan billet over the weekend may be the incentive for this uptrend. It is reported that Tangshan billet market prices rose significantly at the weekend, on the 26th there was a rise of 50 yuan/ton, and on the 27th it continued to increase by 10 yuan/ton.

It is understood that the rise in the price of billet in Tangshan was also triggered in July last year, and the steel market has been rising for more than six months. Whether the increase in billet price is the inflection point for steel prices has once again caused discussion in the industry.

Demand release is the focus of cost needs to be considered

Although the prices of steel billets and steel products have risen, many people in the industry believe that this wave of price increases is only a short-term rebound, and that the basis for the rise in steel prices is still unstable, and it is unlikely that there will be a large increase.

According to industry insiders who hold this view, the current signs of a recovery in terminal demand are still not obvious, steel production is still increasing, traders’ inventory pressure will further increase, and the intensity of demand release will not be able to support the continued upward growth of steel prices.

According to the data of China Steel Association Xunjian, the average daily output of crude steel in the country was 1.944 million tons in mid-March, which was a 2.18% increase from the previous month and a new high in production in the new period.

In addition, according to mysteel inventory data, on March 25, China's five major steel products (ie, rebar, wire rod, hot-rolled, cold-rolled and mid-plate) total inventory of 17.8861 million tons, while the previous inventory on March 4 had Historical highs - 18.9 million tons

Industry sources said that comparing the inventory data, it can be seen that the market has entered the “de-stocking” road, but compared with the production of steel, inventory slowdown is relatively slow. From this we can see that supply and demand are still not “forced.” Affected by high output and high inventory, the contradiction between supply and demand will further intensify, and steel prices are still difficult to reverse.

However, some traders who are optimistic about the trend of the market outlook indicated that the steel market from March to May was in peak season, while the release of downstream demand in the previous period generally showed a weaker feature than in previous years. Therefore, the explosive demand in the later period will exceed the forecast. If the demand for release is greater, the steel market has a higher possibility of reversal.

Wang Zhongyuan, a researcher at Mysteel Research Center, said that the increase in prices during this period was driven by the release of demand. The rise may be maintained until the end of April, but the rate of increase should not be high.

Wang Zhongyuan further stated that the current cost factors also need to be considered and may be able to support steel prices. Some of the steel prices are already close to the cost of stockpiling. Steel prices are supported by costs and the decline may be limited. In addition, at the end of March, the price of imported ore stopped falling and rebounded, and domestic mines also saw a slight increase.