Domestic steel market is facing downward pressure. Plate price is expected to be weak

Since mid-March, the domestic steel market has been oscillating upwards, and the cumulative increase of some types of products has exceeded 5%. Some steel mills have adjusted their prices in line with the market. However, Baosteel, the leader of the plate leader, did not follow the trend, and the price of the June sheet that had just surfaced may have been adjusted downwards. What kind of reasons led to Baosteel’s prudent bid and what impact will it have on the steel market in the later period?

Many factors caused Baosteel's order price to drop steadily in June

On the morning of the 10th, Baosteel issued the price policy for June sheet materials, including hot and cold rolled steel, heavy plate and galvanized steel, which was flat with that of May. The pickling rate was reduced by RMB 100/ton, and that of galvanized steel was lowered by RMB 150/ton. The proportion of non-oriented silicon steel was lowered by 200. -600 yuan / ton, after the adjustment of SS400 5.5mm * 1500 * C hot coil pre-execution price of 4692 yuan / ton, SPCC 1.0mm * 1250 * C is 5296 yuan / ton. At the same time, Baosteel has certain preferential policies for consecutive agents, including hot rolling at RMB 100/ton, RMB 100/ton less than May, RMB 300/ton at cold rolling, pickling, galvanizing and electro-galvanizing 200 yuan/ton, medium and low-grade silicon steel 600 yuan/ton, all without tax.

Baosteel's June Order Price Summary

Variety

Materials

Representative specifications

May execution price

June modulation

June execution price

Order discount

Hot roll

SS400

5.5mm*1500*C

4692

0

4692

100

Hot roll

SPHC

3.0mm*1250*C

5202

0

5202

100

Pickling

SPHC

3.0mm*1250*C

5357

-100

5257

200

Cold rolled coil

SPCC

1.0mm*1250*C

5296

0

5296

300

Cold rolled coil

DC04

1.0mm*1250*C

6776

0

6776

300

Hot galvanized

DC51D

1.0mm*1250*C

5347

0

5347

Electro-galvanized

SECC

1.0mm*1250*C

6817

0

6817

200

Non-oriented silicon steel

B50A800

0.5mm

7440

-600

6840

600

Remarks: The above prices are all raised on the basis of May. All of them are not included in the tax. They are for reference only. The Baosteel announcement shall prevail.

Prior to the introduction of Baosteel's pricing policy, the domestic steel market continued to fluctuate upward, accumulating 1-10% of all varieties from the low point in mid-March. As a result, some steel mills followed up prices, such as Shagang’s heat to May. The rolling order price was raised by RMB 100/t. In this context, Baosteel did not follow up the price increase, but some varieties have been lowered. The main reason is that Baosteel's products are mainly cold-rolled. In the past two months, it was known as the high-end products known as cold rolling. The series has limited gains, among which the cumulative increase in the average cold rolled nationwide price of 1.0 is less than 1%, and the galvanized increase of the same specification is 2.2%, which is significantly lower than the products such as thread and hot coil in the same period.

National Daily Average Price Week for Main Steel Products (May 9)

Today's price

Same time last week

Compared to last week

Same period last month

Than last month

March 11 lows

Accumulated gains and losses

Change rate

20 secondary threads

4989

5013

-twenty four

4796

193

4652

337

7.2%

6.5 high line

4937

4949

-12

4761

176

4642

295

6.4%

3.0 hot roll

5045

5076

-31

4980

65

4780

265

5.5%

6.0 hot roll

4901

4932

-31

4844

57

4642

259

5.6%

20 Medium Board

5019

5025

-6

4934

85

4804

215

4.5%

1.0 cold plate

5656

5660

-4

5608

48

5626

30

0.5%

1.0 galvanized

5805

5804

1

5735

70

5678

127

2.2%

While the price increase is limited, the performance of major downstream industries is less than ideal, with the automotive industry being the most obvious. According to the latest statistics, in April, China’s automobile production and sales volume were 1.5353 million and 1.5520 million vehicles, a decrease of 15.98% and 15.12% from the previous quarter, and they were down 1.9% and 0.2% year-on-year respectively. The accumulated production and sales volume in January-April were 6.43 million vehicles respectively. 6.53 million vehicles, a year-on-year increase of 5.1% and 5.95%, far below the same period of last year (63.8% and 60.5%). From the perspective of some auto manufacturers, the production in May was still relatively flat, consistent with the operating conditions in the off-season in previous years. The sales of home appliances were better than those of automobiles, but the growth rate also slowed down. In addition to the year-on-year growth in the output of air conditioners, the year-on-year growth in the output of refrigerators and washing machines fell. The lagging production in the downstream industry directly affected its order quantity and eventually became an important reference factor for Baosteel's pricing.

Of course, the order price of Baosteel's main sheet products has not risen with steel prices, and its price level has a relatively high relationship. Taking 1.0mm carbon cold coils as an example, Baosteel produces SPCC products with a post-tax order price of 6196 yuan. Tons, with the same specifications of the same material Anshan Iron and Steel products is 5463 yuan / ton, a difference of more than 700 yuan. According to the author's understanding, the downstream industries such as household appliances and hardware products are not very demanding for cold rolling of ordinary carbon, and Baosteel's product cost-effectiveness is not high. If this raises prices, downstream users will find it harder to accept.

Domestic steel market is facing downward pressure

Baosteel's price policy undoubtedly reflects its cautious attitude towards the market outlook, and it also reflects that some of the plate downstream industries have been slowed down. Judging from the operating trends over the years, the period from May to June is the off-season of major manufacturing production. Obviously, this situation is unlikely to change in the short term. As for the construction industry, the total planned investment for new investment projects in fixed assets at the end of March fell by 12.7% year-on-year. It will certainly affect the growth rate of fixed-asset investment in the latter part of the year, coupled with factors such as rising temperatures and the effect of tightening policies. It is expected that the investment will slow down.

While the overall demand is weak, the operating rate of steel mills is high, and the amount of resources available for follow-up can be considerable. It is understood that although the recent news on the 'electricity shortage' has been overwhelming, but according to Ben Wang understand that only some parts of the southern part of the Jiangxi, Hunan and other places have been affected by some steel production, but the absolute amount is limited. According to the latest report issued by the China Iron and Steel Association, the daily output of crude steel in April was 1.931 million tons, an increase of 1% from the March figure of 1.912 million tons, which is the highest level in history at the same level. At the same time, according to incomplete statistics from China United Iron and Steel Network, in early May, the operating rate of blast furnaces in the Tangshan area was once again restored to more than 95%, the opening rate of local strip rolling mills dropped slightly to 80.6%, and some companies in Tianjin and Hebei were screwed. The line utilization rate was maintained at 80.5% and the overall level was at a relatively high level. In terms of the May production plan for the leading steel mills, hot-rolled and medium-thick steel plates all showed an upward trend compared with the previous quarter, of which 37 major coiled steel mills had production plans of 9.238 million tons, which was a 2.2% increase from the previous month. In my opinion, under profit stimulation and the pursuit of market share, the steel plant operating rate is at a historically high level, indicating that the increase in the amount of resources put in the later period may change the trend of the recent decline in social stocks, and in turn slightly increased.

In addition, from the perspective of raw material operating trends, 63.5% of India's foreign mineral powder quotation is close to US$190/dry ton, and Tianjin Port's spot price is RMB1,370/wet ton. High-priced prices can indeed provide cost support. However, I still insist that the current iron ore price is already at a relatively high level, and from the past, the iron ore price and the price of copper, steel prices and the recent trend of international commodity prices point of view, the late spot price adjustment of iron ore deposits Necessary, when it will play a significant role in supporting the steel price.

Finally, from the perspective of macroeconomic policy, relevant economic data for April will soon surface, and the overall CPI is expected to show a slight decline, but the probability is higher than 5%, and the inflation situation is still severe. The tightening policy is expected to not change. At the same time, a series of austerity measures since the fourth quarter of last year will gradually emerge after a half-year fermentation period.

On the whole, the existing high cost will form a support for the steel market, but the downstream industry boom of the main plate is declining, and the steel plant operating rate is high. At the same time, the macroeconomic policy is still expected to be tightened. The cumulative effects of the policies will gradually appear in the fourth quarter of last year. All will restrict the plate market operation. From this point of view, the bullish atmosphere in the domestic steel market is being weakened and the overall market is facing downward pressure. However, due to the long-term fluctuations in the long-term market after the existence of technical repair requirements, short-term deposits may be repeated.