21st Century Business Herald reporter Peng Qiang reported from Beijing
Under the dual pressure of the collapse of raw material costs and the continued weakness of demand, steel prices continued to decline. Trapped by the sharp decline in steel prices, the agency pointed out that some steel companies have experienced losses, under the pressure of stop-loss maintenance and production restrictions, the contraction of the supply side of the domestic steel market in November may exceed expectations.
The black system suffered a major setback
On November 15, the domestic steel market fell across the board; according to my steel network data, steel including rebar, hot-rolled coil, medium and thick plates, seamless pipes, etc., was simultaneously reduced in price, with a decline of 50 yuan / ton - 160 yuan / ton.
Steel prices fell sharply. Image source: Sina Futures
In the futures market, the entire black market suffered a heavy setback. As of the afternoon close on November 15, rebar futures fell 4.54% to close at 4138 yuan / ton; hot-rolled coil futures fell 4.23% to close at 4433 yuan / ton.
In terms of raw materials, the main contract of iron ore futures fell 2.53% to close at 539 yuan / ton. Since reaching its highs in mid-May, following the weakness of the steel market and the reduction in production in the second half of the year, iron ore prices have continued to decline, although there was a brief recovery in mid-to-early October, but they have fallen out of the historical high range and returned to the normal price level of previous years.
Iron ore prices fell to previous year's average levels. Image source: Sina Futures
The main coke contract fell 9.60% to close at 2708 yuan / ton; the main coking coal futures contract fell 13.05% to close at 1958.5 yuan / ton. Compared with the historic highs set in mid-October, the prices of coking coal and coke futures have fallen by more than 40%. Since the end of September, various regulatory authorities and coal production enterprises have made in-depth adjustments to the upstream and downstream of the coal industry, and the previously overheated coal prices have entered a continuous downward channel, and the growth of domestic coal production is also steadily progressing.
According to data released by the National Bureau of Statistics, domestic raw coal production in October was 360 million tons, an increase of 4.0% year-on-year; imported coal was 26.94 million tons, an increase of 96.2% year-on-year.
The supply and demand of the steel market are weak
Domestic steel production continued to decline in October, and market demand will continue to weaken as the north enters the traditional consumption off-season. Judging from the real estate data that has been disclosed, it is difficult to have a significant driving effect on the steel market.
According to data released by the National Bureau of Statistics on November 15, domestic crude steel production was 71.58 million tons in October, down 23.3% year-on-year; in the first 10 months of this year, domestic crude steel production was 877 million tons, down 0.7% year-on-year.
In October, domestic pig iron and steel production was 63.03 million tons and 102 million tons, respectively, a year-on-year decline of 19.4% and 14.9%, respectively.
From the perspective of daily output, the daily crude steel production in October has been lower than the same period in 2019 for three consecutive months, setting a record for the lowest daily crude steel production since 2018. Under the pressure of policy-oriented production pressure, the release of steel production capacity of domestic steel enterprises has been significantly suppressed.
In the past two years, the monthly output of crude steel in China. Image source: Lange Steel
According to the statistics of China Steel Association, in October 2021, the cumulative daily crude steel output of key steel enterprises was 1.8272 million tons, down 5.6% month-on-month and 15.99% year-on-year.
At present, the domestic steel market is already in the traditional demand off-season, with the approaching of winter, the northern market demand will gradually weaken, the southern market demand to maintain; at the same time, the project construction progress will be significantly affected by the weather, and the demand for manufacturing steel may remain weak.
My steel network pointed out that under the influence of pessimism, the market volume is sluggish, and manufacturers continue to reduce prices and ship. In terms of construction steel, hot-rolled coil and cold-rolled coil, the overall transaction situation is still not optimistic.
Lange Steel analysis pointed out that the decline in steel prices has continuously compressed production profits, the estimated profitability of major steel varieties has reached a negative value, and the intensity of active maintenance by steel mills has increased. Analysis, the current round of decline in the market is mainly the weakness of terminal demand for the entire black industry chain negative feedback, the current terminal demand has not improved, raw materials coke prices are still at a high level, the market anti-rotation energy is insufficient.
Lange Steel Research Center Director Wang Guoqing said that the recent real estate in terms of financing has a certain loosening, real estate credit environment improvement for real estate continued to weaken will have a certain buffer effect, but in the context of poor performance of previous indicators, winter construction restrictions and real estate sales fell sharply, the real estate industry will still show a weak trend in the next few months. Therefore, the "loosening" of housing loans has little impact on the steel market, and in the short term, the steel market may continue to shock and bottom out.
Supply contracted or exceeded expectations in November
Ge Xin, deputy director of Lange Steel Research Center, pointed out that since November, the demand for domestic steel spot market has shown obvious signs of inadequacy, and the trend of policy pressure production has been severe, and it will continue to restrict the release of steel production capacity; the daily crude steel output of medium and large steel enterprises has shown a trend of first rising and then falling, but the cumulative output is still in a downward trend.
Ge Xin said that in the context of policy-oriented production pressure, the implementation of regional production restrictions in autumn and winter will be more stringent, and the northern ring Beijing region will also be affected by the Winter Olympics, and atmospheric safeguard measures will form a greater restriction on the release of regional output.
At the same time, the sharp decline in domestic steel market prices has made steel mills lose money, and domestic steel production enterprises will face the dual pressure of passive production limitation and active production reduction in the later stage, so the contraction of the supply side in the later period may exceed expectations.
According to lange steel research center estimates, in November 2021, the national crude steel nissan production or will fall below 2.2 million tons, of which the key large and medium-sized steel enterprises crude steel daily production may drop to less than 1.8 million tons.
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