Since the second quarter of this year, steel prices nationwide have fluctuated and risen. Data from Lange Steel Information's market monitoring shows that as of August 14, 2018, the Lange Steel Price Index was 168.6 points, up 12.4% from March 30 of this year. Among them, the long steel price index was 185.1 points, up 19.3%; the flat steel price index was 153.9 points, up 8.6%.
Since the second quarter of this year, steel prices nationwide have fluctuated upward. Data from Lange Steel Information's market monitoring shows that as of August 14, 2018, the Lange Steel Price Index was 168.6 points, a 12.4% increase compared to March 30 of the same year. The long steel price index was 185.1 points, up 19.3%; the flat steel price index was 153.9 points, up 8.6%. On August 13, 2018, the closing price of the main rebar contract was 4327 yuan per ton, a 27.6% increase compared to March 30.
Simultaneously with the continuous rise in steel prices, national steel production has also reached new highs. Statistics show that from January to July of this year, national crude steel production reached 532.85 million tons, a year-on-year increase of 6.3%; national steel production reached 625.87 million tons, an increase of 6.6%. In July alone, national crude steel production reached 81.24 million tons, a year-on-year increase of 7.2%; steel production reached 95.69 million tons, an increase of 8.0%. Based on this calculation, it is estimated that China's crude steel production in 2018 will reach 900 million tons, and steel production (including double counting) will exceed 1 billion tons, approaching 1.1 billion tons.
Influenced by the above two factors, a sense of apprehension about high steel prices has arisen in the Chinese steel market. Some opinions have been voiced warning market participants of the risk of a price surge followed by a decline.
Chen Kexin of Lange Steel believes:
Based on a comprehensive analysis of various aspects of the current situation, the key factor determining the trend of steel prices this year is the inventory situation. We need to closely monitor the rise and fall of national steel inventories in the next phase, including both social inventories and inventories held by steel companies. This is because: the trend of steel prices is always subject to its sales situation. Demand leads to sales, profits, and prevents inventory buildup, thus supporting and raising prices. If sales are sluggish, large inventories will accumulate. Due to fierce competition, steel producers and distributors will inevitably be forced to lower prices to sell. Otherwise, the continuously accumulating inventory will tie up large amounts of capital, eventually leading to the collapse of companies.
As for the continuous record highs in national steel production, market participants need not be overly concerned. As long as there is no abnormal increase in steel inventories during the same period, it indicates that the consumption demand is stronger, and the increased steel production is being absorbed, not disrupting the supply-demand balance, and therefore will not cause drastic market fluctuations.
Therefore, the inventory situation comprehensively reflects multiple aspects of market relations and is indeed an important leading indicator for observing and judging the future trend of steel prices, with a clear logical relationship between them.
