steel

February is the off-season of steel demand, affected by the heating season, the Winter Olympic Games production restrictions, the superimposed cold weather, repeated novel coronavirus epidemic in some areas and other factors, the domestic market steel demand is relatively weak, iron and steel production remains at a low level. Driven by stronger market expectations after the Spring Festival, steel prices rose slightly in the first two weeks of March.

I. domestic steel price index rose slightly

At the end of February, China's steel price index (CSPI) was 135.94 points, up 2.96 points from the previous month, or 2.23% from the previous month, up 1.25% from the previous month, and 4.58 points from a year earlier, up 3.49% from a year earlier, according to the Iron and Steel Association. (see figure below)

Trend Chart of China Steel Price Index (CSPI) (Unit: point)

(1) the price of long plates has increased month-on-month.

At the end of February, the CSPI long wood index was 141.74 points, up 2.97 points from the previous month, up 2.14% from the previous month. The board index was 133.11 points, up 2.89 points from the previous month, or 2.22%. Compared with the same period last year, the index of long wood and plate increased by 6.78 points and 1.94 points respectively, up 5.02% and 1.48% respectively. (see figure and table below)

CSPI long wood and sheet price index trend chart (unit: point)

Table of changes in China Steel Price Index (CSPI)

(2) changes in the prices of major varieties of steel

At the end of February, the prices of the eight major steel varieties monitored by the Iron and Steel Association all increased. Among them, the prices of high-speed wire, third-grade steel bar, angle steel, hot-rolled coil and cold-rolled sheet increased by 77 yuan / ton, 107 yuan / ton, 119 yuan / ton, 106 yuan / ton and 107 yuan / ton, respectively, while the prices of medium and heavy plate, galvanized sheet and hot-rolled seamless tube increased by 114 yuan / ton, 118 yuan / ton and 149 yuan / ton respectively. (see table below)

Table of price and index changes of main steel products

(3) the change of steel price index from week to week

Since February, the CSPI composite index has fluctuated at a high level, and steel prices have risen somewhat after the Spring Festival, but fell slightly in the third and fourth weeks; since March, steel prices have maintained an upward trend in the first two weeks and fell slightly in the third week. (see table below)

(4) changes in steel prices in major regional markets

In February, the six major regional indexes of CSPI continued to rise. Among them, the increases in the northwest and northeast regions were relatively large, up 2.71% and 2.70% respectively from the previous month; those in eastern China were relatively small, up 1.81% from the previous month; and those in the north, south-central and northwest regions increased by 2.45%, 2.12% and 2.45% respectively. (see table below)

II. Analysis on the changing factors of Steel Price in domestic Market

February is the off-season of steel demand, affected by the "Winter Olympic Games", heating season production restrictions and other factors, steel production remains low; driven by expected growth, steel prices rose slightly.

(1) Infrastructure and manufacturing industries maintain growth, while real estate growth is relatively slow.

From January to February, national fixed asset investment (excluding farmers) increased by 12.2% compared with the same period last year, an increase of 0.66% month-on-month, according to the National Bureau of Statistics. Of this total, investment in manufacturing increased by 20.9%, and investment in infrastructure increased by 8.1% over the same period last year; national investment in real estate development increased by 3.7% over the same period last year, of which the area of new housing construction decreased by 12.2%; and the added value of industries above scale increased by 7.5% over the same period last year, up 0.34% from the previous year. Among them, general equipment manufacturing, special equipment manufacturing and electrical machinery and equipment manufacturing increased by 5.0%, 8.8% and 13.6% respectively compared with the same period last year; national automobile production and sales increased by 8.8% and 7.5% respectively over the same period last year; and electricity consumption of the whole society increased by 5.8%. China's manufacturing PMI was 50.2% in February, up 0.1% from a month earlier and above the tipping point for four consecutive months. Taken together, manufacturing and infrastructure steel continued to recover, while real estate demand was sluggish.

(2) Iron and steel output and net steel exports have declined, and supply and demand have basically remained stable.

According to the National Bureau of Statistics, from January to February, the national output of pig iron, crude steel and steel (excluding duplicates) was 132.13 million tons, 157.96 million tons and 196.71 million tons respectively, down 10.8%, 10.0% and 6.0% respectively from the same period last year. The average daily output of crude steel was 2.677 million tons, down 3.7% from the previous month. According to customs statistics, from January to February, the country exported 8.23 million tons of steel, a decrease of 1.15 million tons, or 12.3 percent, compared with the previous month; imported steel 2.21 million tons, a decrease of 220000 tons, a decrease of 9.0 percent. Net exports of steel were 6.03 million tons, down 1.72 million tons or 22.2% from the same period last year. Taking into account the decline in steel demand in the domestic market during the "Winter Olympic Games" and the "two sessions," and the 13.4% drop in social inventory of five kinds of steel in the country's key cities at the end of February compared with the same period last year, to a certain extent, the domestic steel market showed a basically stable trend at both ends of supply and demand.

(3) the rise in raw fuel prices has pushed up the production costs of iron and steel enterprises.

According to the monitoring of the Iron and Steel Association, at the end of February, the price of domestic iron concentrate rose 57 yuan / ton compared with the previous month, while the price of imported CIOPI ore decreased by 9.91 US dollars / ton; the price of coking coal decreased by 235yuan / ton; the price of metallurgical coke decreased by 250yuan / ton; and the price of scrap steel increased by 32 yuan / ton. Raw fuel prices fell slightly, reducing the cost burden of enterprises. (see table below)

III. Steel prices in the international market continue to decline compared with the previous month.

In February, the CRU international steel price index was 286.6 points, down 8.4 points, or 2.8%, from the previous month; it rose 54.9 points, or 23.7%, from a year earlier. (see figure below)

International steel price index (CRU) trend chart (unit: point)

(1) the long wood index has changed from a decrease to an increase, and the decline of the plate index has narrowed.

In February, the CRU long wood index was 274.2 points, up 1.0% from a month earlier, while the CRU plate index was 292.8 points, down 13.8 points, or 4.5%, or 1.4% lower than the previous month. Compared with the same period last year, the CRU long wood index rose 55.6 points, or 25.4%, compared with the same period last year, an increase of 54.6 points, or 22.9%, compared with the same period last year. (see figure below)

CRU long wood and sheet price index trend chart (unit: point)

(2) the decline in North America has increased, while that in Europe and Asia has changed from decline to rise.

1. North American market

In February, the CRU North American steel price index was 333.4 points, down 55.9 points, or 14.4%, from the previous month, up 8.3% from the previous month, while the US manufacturing PMI was 58.6%, up 1.0% from the previous month. At the end of February, the utilization rate of crude steel capacity in the United States was 79.7%, down 0.9 percentage points from the previous month. Among the main steel varieties of steel mills in the Midwest of the United States this month, the prices of long products are basically stable, the prices of medium and thick plates have dropped slightly, and the prices of sheet steel have dropped significantly. (see table below)

2. European market

In February, the CRU European steel price index rose 7.9 points, or 2.6 per cent, to 317.1 points, while the euro zone manufacturing PMI was 58.2 per cent, down 0.5 per cent from the previous month. Among them, the manufacturing PMI of Germany, Italy, France and Spain was 58.4%, 58.3%, 57.2% and 56.9% respectively, with the exception of German manufacturing PMI declining, all other countries increased month-on-month. This month, the price increase of steel bars and small profiles in the German market narrowed, wire rod and section steel changed from rising to falling, and plate prices all changed from falling to rising. (see table below)

3. Asian market

In February, the CRU Asian steel price index was 242.2 points, up 4.5% from the previous month; Japanese manufacturing PMI was 52.7%, down 2.7% from the previous month; South Korean manufacturing PMI was 53.8%, up 1.0% from the previous month; and China's manufacturing PMI was 50.2%, up 0.1% from the previous month. Among the main steel varieties in the Indian market this month, the prices of steel bars and wire rods increased, the prices of medium and thick plates and hot-rolled strip coils stopped falling and rising, the decline of cold-rolled strip coils narrowed, and hot-dip galvanizing increased from falling to rising. (see table below)

IV. Analysis of the trend of steel price in the later period

With the conclusion of the "two sessions" and the end of production restrictions in the heating season, the market has gradually entered the peak season of demand. Due to the severe impact of the epidemic situation of novel coronavirus in some areas, the demand for steel in the downstream industry may be lower than expected, and steel prices will still fluctuate slightly in the later period.

(1) the market expectation has increased, and the demand for steel will start gradually.

In his government work report delivered at the Fifth session of the 13th National people's Congress on March 6, Premier Li stressed that this year, the state will allocate 3.65 trillion yuan of local government special bonds to start a number of major projects, new infrastructure, outdated public facilities and other construction projects, and appropriately carry out infrastructure investment in advance around the country's major strategic arrangements and the 14th five-year Plan. Adhere to the positioning that houses are used for living, not for speculation, promote the development of the real estate industry because of urban policies, continue to support the consumption of new energy vehicles, encourage localities to carry out green smart home appliances to the countryside and trade in old ones for new ones, and start work on the renovation of a number of old urban neighborhoods to promote barrier-free environment construction and aging transformation. "stabilizing the word and striving for progress in the midst of stability" is the general tone of this year's economic work. With various measures to expand domestic demand and stabilize growth, steel demand will gradually start in the later stage.

(2) the rate of decline at the supply side narrows, while the demand side tends to rise as a whole.

According to the statistics of the Iron and Steel Association, in early March, the daily output of crude steel in iron and steel enterprises was 1.959 million tons, down 5.72 percent from the previous month; the daily output of pig iron was 1.7431 million tons, down 4.70 percent from the previous month; and the daily output of steel was 1.9137 million tons, down 8.47 percent from the previous month. According to this, it is estimated that the national daily output of crude steel is 2.5527 million tons, down 5.12% from the previous month; the daily output of pig iron is 2.1059 million tons, down 3.86% from the previous month; and the daily output of steel is 3.2641 million tons, down 5.04% from the previous month. With the warmer weather, new projects will be launched one by one, but the novel coronavirus epidemic has a certain adverse impact on the demand of the downstream steel industry. On the whole, the supply and demand of steel market will be generally stable.

(3) the increase of enterprise inventory has narrowed, and social inventory has changed from rising to falling.

According to the statistics of the Iron and Steel Association, as of early March, the steel inventory of iron and steel enterprises was 16.68 million tons, an increase of 5.39 million tons, an increase of 47.7 percent over the beginning of the year, and a decrease of 1.2 million tons, or 6.7 percent, over the same period last year. Judging from the month-on-month situation, it increased by 21.1% at the end of January, 17.7% at the end of February, and 3.6% in the first ten days of March compared with the end of February, showing a narrowing trend. From the perspective of social inventory, in the first ten days of March, the social inventory of five major varieties of steel in 21 cities was 14.53 million tons, an increase of 6.65 million tons, or 84.4 percent, over the beginning of the year; it decreased by 3.74 million tons, or 20.5 percent, compared with the same period last year; from a month-on-month point of view, it was 1.0 percent lower in early March than at the end of February, the first decline after a continuous rise in 60 years. Steel production remains at a low level, and steel inventories are on a downward trend, indicating that downstream demand has started.

The main issues that need to be paid attention to in the later stage:

First, the situation of prevention and control of the epidemic situation of novel coronavirus in some areas is grim, which will have a greater impact on market demand. Iron and steel enterprises should pay close attention to the changes of the market situation and, on the basis of ensuring supply and stabilizing prices, adjust the production rhythm, optimize the product structure, do a good job of self-discipline in production and marketing, and maintain the smooth operation of the steel market.

Second, the conflict between Russia and Ukraine has an impact on the supply chain of the international industrial chain, driving up commodity prices. At present, the price of raw fuel such as iron ore and coke is running at a high level, and the capital in and out of the futures market goes in and out frequently, which plays a significant role in guiding the spot price. The price of raw fuel for iron and steel production will continue to fluctuate at a high level.