After a short-term rational adjustment in steel prices, the steel market is still promising in September.
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Published Time:
2020-07-10
In September, steel prices started weakly, and the upward momentum was weak. It seems that the "golden September" is about to be missed, but I believe that steel prices in September are still promising. Let me briefly analyze several positive factors below.
Steel prices started weakly in September, with a lack of upward momentum, seemingly dashing hopes for a strong September. However, I believe that September's steel prices still hold promise. Let me briefly analyze several positive factors below.
I. Environmental Protection and Production Restrictions
Environmental protection and production restriction policies have not been relaxed, especially in Tangshan, a major steelmaking city. Although the "Tangshan Ecological Environmental Deepening Governance and Intensive Action Plan" issued yesterday by the Tangshan Municipal Ecological Environment Protection Leading Group Office has been withdrawn due to issues with details, the plan's requirement that steel mills' production restrictions in September should be no less than those in August is still noteworthy. In addition, production restrictions are no longer limited to Tangshan. Restrictions have been fully implemented in Linfen, with Xingyuan, Henglue (Zhiqiang Steel acquired by Liheng), Xinjinshan, and Zhongsheng (within the Xiangfen area) all halting production until September 20th. Liheng and Jianbang in Houma are operating at 50% capacity until September 20th, with a complete production halt in Houma starting September 21st, and Xiangfen maintaining 50% production restrictions. The expansion of environmental protection and production restriction areas is a strong factor in boosting confidence in steel prices.
II. Supply
According to data released by the China Iron and Steel Association: In mid-August, major steel companies produced 18.952 million tons of crude steel, 17.1707 million tons of pig iron, and 17.8429 million tons of steel. Daily production and changes compared to the previous ten days are as follows: crude steel 1.8952 million tons, a decrease of 41,800 tons (2.16%); pig iron 1.7171 million tons, a decrease of 33,600 tons (1.92%). Overall, steel production has slightly decreased, and supply remains tight. It is also understood that maintenance has increased in various places (as shown in the figure below), and shortages of some market specifications still exist.
III. Infrastructure
According to the latest data, the sales area of commercial housing increased by 4.2% year-on-year from January to July; real estate development investment nationwide increased by 10.2% year-on-year from January to July; the area of housing under construction increased by 3.0% year-on-year; and the area of newly started housing construction reached 114,781 million square meters, a year-on-year increase of 14.4%, reversing the previous downward trend in growth. This provides some support for steel demand.
With the continuous pressure of environmental protection and production restriction policies, market participants have positive expectations for the future. At the same time, after the beginning of autumn, the construction start-up rate in northern China has increased, and downstream demand is expected to be gradually released. With cost pressures, finished product prices are difficult to suppress, and steel mills have a strong willingness to maintain prices. Therefore, I believe that after a short period of rational adjustment, a strong September is still possible.
