[SMM Analysis] It's difficult for the transformer industry to have large-scale projects in the short term. Next week, the Shanghai market for electrical steel with grain-oriented will be in the doldrums.

Price Dynamics of Grain-Oriented Electrical Steel

Shanghai B23R085 grade: 14,200-14,400 yuan/mt

Wuhan 23RK085 grade: 14,100-14,300 yuan/mt

​This week, the prices of cold-rolled grain-oriented electrical steel in Shanghai generally fell, with overall market transactions remaining sluggish and showing no signs of recovery. As a core raw material for transformers, the weak demand from the downstream transformer industry has further exacerbated the sluggish transaction situation. Some small and medium-sized transformer manufacturers have significantly reduced their procurement volumes of grain-oriented electrical steel due to insufficient orders. Despite the strong upward trend in the HRC futures market this week and the clear proposal at the Central Financial and Economic Affairs Commission meeting to regulate enterprises' low-price and disorderly competition in accordance with laws and regulations, guide enterprises to improve product quality, and promote the orderly exit of backward capacity, which has fueled rising expectations for supply-side reforms and gradually improved market sentiment, market participants in the grain-oriented electrical steel sector still lack confidence, and the prospects for a price rebound remain slim.​

At the fundamental level, state-owned enterprises mainly supply their products directly to end-users, with scarce resources from state-owned enterprises in the trade and circulation links. Affected by pessimistic expectations, producers have found it increasingly difficult to secure orders, and there has been a significant hidden price reduction in the acceptance price of grain-oriented electrical steel. Traders have adopted a cautious attitude towards purchasing, with a strong wait-and-see sentiment. Downstream small end-users only maintain purchasing as needed and have no intention of restocking. Among them, transformer manufacturers mainly consume their inventory, and except for just-in-time procurement for large-scale power transformer projects, the demand for restocking grain-oriented electrical steel has almost stalled.​

Looking ahead, it is expected that the sluggish transaction situation in the market will remain unchanged, with downstream enterprises showing low enthusiasm for purchasing except for large end-users. The transformer industry is unlikely to see large-scale project launches in the short term. It is anticipated that the Shanghai grain-oriented electrical steel market will maintain a weak and stable operation trend next week, with prices still facing downward pressure.