The troubles in China's steel industry are increasing. Domestic steel companies, which were struggling to cope with the soaring price of iron ore, are now facing the problems of weak market demand and poor export conditions brought about by macroeconomic regulation and control. Last weekend, as the price "wind vane", Baosteel's main product ex-factory price policy was introduced in July, and many of them were significantly lower than in June. Industry insiders predict that other steel mills are likely to follow up on price cuts, and the “turning point†of domestic steel prices is officially coming.
Baosteel price cut forced other manufacturers to follow the battle
According to the latest ex-factory price announced by Baosteel Co., Ltd., hot rolling, pickling and galvanizing are generally lowered by 300-500 yuan/ton, and cold-rolled carbon products are lowered by 500 yuan/ton. It is also worth noting that Baosteel's deep-rolling cold rolling has the largest reduction, up to 1,000 yuan.
As we all know, Baosteel's cold-rolled automotive panels have absolute leading position and advantages. In recent years, the domestic market share has remained at around 50%. Therefore, Baosteel's price cut has caused widespread concern in the industry.
Hu Yanping, an analyst at China United Steel Network, said: “Since mid-April, the domestic steel market price has dropped significantly, which has caused Baosteel to cut the price of the product. However, the leading big brother Baosteel has the most market leading position and recognition. The high cold rolled sheet price cut of 1,000 yuan / ton will certainly have an oppressive impact on other steel mills, Angang, WISCO and other steel mills in July will increase the pressure on new prices will increase."
Multiple factors prompted the downward turning point
"It is no exaggeration to say that China's steel prices have turned in the corner. In fact, the price in the market has already dropped for several weeks. Now, even the ex-factory price of steel mills has entered a downward adjustment cycle. It can be seen that the inflection point of China's steel prices has already appeared." An industry analyst told reporters.
In fact, in the first quarter of this year, with the expected increase in iron ore price increases, domestic steel prices have continued to rise. In the words of the industry, the price of the plate rose even in March. However, after entering May, the steel price that has been rising continuously has cooled rapidly.
According to the May Industrial Operation Data Report released by China Automotive Technology and Research Center, automobile production and sales data decreased for the second consecutive month. In May, domestically produced automobile production was 1,132,700, down 14.36% from the previous month, and sales were 1,194,700. It fell by 13.95%. "In addition to the automobile market, China's real estate industry's regulation and control policies also have a direct impact on steel consumption, resulting in a light market demand, which has led to an increase in the current factory price cuts of leading steel mills. Not long ago, including Rizhao Steel, Anshan Iron and Steel, Maanshan Iron and Steel, Shagang Leading steel mills such as Hegang, Baotou Steel, Benxi Steel and Taigang have generally lowered the ex-factory price of major varieties in June,†said Ge Wei, an analyst at Lange Steel Network Information Research Center.
The bottoming trend in the second half of the year has been set
Hu Yanping also pointed out that there will continue to be a significant downward adjustment in steel prices in the future. She said that from the perspective of supply and demand fundamentals, effective demand is weakening and supply is expected to increase. It is also understood that the recent export orders of steel mills are not satisfactory, and it seems that the shrinking of exports in the future will be difficult to avoid. Ge Wei emphasized to reporters that the United States has continuously established trade protection barriers against China's steel products and the unsatisfactory economic situation in Europe and the United States, which has further affected China's steel exports.
Overall, in the near future, many steel mills such as Angang and Wuhan Iron and Steel will also join the price reduction team. It is expected that the downward adjustment will be considerable, which will inevitably have a certain impact on the market mentality. Moreover, the macro-level and supply and demand fundamentals are not ideal, and will continue to restrict the operation of the steel market. It is expected that the overall steel market bottoming trend will not change in the second half of the year.
However, at the same time as steel prices fell, China’s Ministry of Transport said that China’s iron ore imports fell by 2.5% year-on-year in May, the first negative growth since last year. This data also shows that the trend of China's iron and steel enterprises to reduce production is obvious, coupled with the iron ore price has been at a high level, the cost support is still, so when the price drops to a certain level, it will usher in a small replenishment of the downstream replenishment.
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