SMM Analysis: With both supply and demand falling, can infrastructure sectors be underpinned in 2024? ——2024 Building Materials Price Trend

Looking back at the price trend of construction steel in 2023, the overall situation is "high at both ends and low in the middle", and the center of steel prices has obviously shifted downwards. Specifically, the national average rebar price in 2023 was 3,897 yuan/mt, compared with the average price in 2022 of 4,395 yuan/mt, a year-on-year decrease of 11.33%. The price trend for the whole year of 2023 can be divided into 4 stages. The first stage: from January to early March, real estate policies were favorable, and the demand for replenishment after CNY holiday was pushed up; the second stage: from mid-to-late March to May, macro expectations fell, and supply and demand imbalance was prominent, and the spot price fell to the low of the year; the third stage: the game between weak reality and strong expectations from June to mid-October; the fourth stage: from late October to December, strong macro expectations were combined with raw material support, and the spot price was pushed up again.

In terms of variety differences and regional price differences, the wire rod-rebar spread slightly expanded from 198 yuan/mt in 2022 to 212 yuan/mt, and the HRC-rebar spread expanded from 29 yuan/mt in 2022 to 108 yuan/mt. The overall price trend of HRC was stronger than that of rebar, and the price of rebar has the largest decline among varieties. Prices in east China was relatively bright in 2023, while price trends in the South was not as good as in 2022, and the pattern of regional differences changed. The average price in Guangzhou in 2023 was 3,960 yuan/mt, a year-on-year decrease of 12.9%. The average price in Hangzhou in 2023 was 3,989 yuan/mt, a year-on-year decrease of 10.7%. In Beijing, the price dropped by 11.3%. The price difference between the north and the south narrowed significantly, causing the southbound movement of northern materials to be affected.

From a fundamental point of view, on the supply, the trend of raw materials continued to be strong, and steel production profits had not seen significant expansion, but the overall profit margin was better than in 2022. Specifically, in 2023, the profits of BF were basically in the range of -150-200 yuan/mt, and the profits of EF plants were in the range of -200-300 yuan/mt. In the fourth quarter, the overall profit performance of BF was not as good as that of electric furnace plants. At the end of 2023, electric furnace plants continued to maintain high operating rates, while BF plants experienced a decline in operating rates due to environmental protection production restrictions and loss control. At the end of the year, electric furnace plants went on holidays one after another, and basically stopped production at the end of January and early February. Many steel plants planned to resume production around Feb 24, and production will gradually resume after CNY.

From the perspective of demand, the total rebar inventory level in 2023 was basically lower than that in 2022. There is less pressure on factory warehouses and social warehouses because traders dare not stock up rashly. However, affected by real estate downturn, the overall demand for rebar in 2023 was not very good. The average demand in 2023 was around 267, and the average in 2022 was around 284. The average value fell by 5.7% year-on-year.