With the fluctuation of raw material prices, the cost of different raw material inventory cycles varies significantly. In order to make it easier for customers to understand the cost changes of different inventory cycles, Lange Steel Research Center compares the cost indices of raw materials purchased at sight, raw material inventory in two weeks, and raw material inventory in four weeks, as shown in Figure 1. As can be seen from the figure, with the continuous decline in the prices of major raw materials, the estimated cost of spot and two-week inventory raw materials in April 2024 has bottomed out, while the estimated cost of four-week inventory raw materials has shown a fluctuating and declining characteristic.
Fig.1 Lange pig iron cost index chart
Judging from the monthly average performance, it is still showing a downward trend. According to the monitoring data of Lange Steel Research Center, the spot raw material cost index in April 2024 was 116.7, a decrease of 2.5% from the same period last month; The two-week inventory raw material cost index was 114.0, down 10.6% from the same period last month; The four-week raw material inventory cost index was 116.4, down 12.8% from the same period last month.
In April 2024, the gross profit per ton of steel of steel enterprises will be differentiated in different cycles
In April 2024, the monthly average of Lange Steel's comprehensive steel price index was 3,988 yuan/ton, down 1.8% from the previous month; Among them, the average monthly price of rebar was 3,718 yuan/ton, down 0.9% from the previous month; The average monthly price of hot-rolled coil was 3,874 yuan/ton, down 1.8% from the previous month; The average cost of raw materials in the spot, two-week and four-week inventory decreased by 2.5-12.8%, which shows that the cost decline is greater than the average price of steel, so the gross profit is estimated to have improved to varying degrees.
From the perspective of third-grade rebar, the profit of spot raw materials of third-grade rebar in April was 120 yuan/ton, an increase of 56 yuan/ton from the previous month; The estimated profit of raw materials in two weeks and four weeks was 181 yuan/ton and 134 yuan/ton respectively, turning from loss to profit, an increase of 269 yuan/ton and 369 yuan/ton respectively from the previous month (see Figure 2 for details).
From the perspective of hot-rolled coil, the profit of hot-rolled coil in April was 63 yuan/ton, a decrease of 9 yuan/ton from the previous month. The estimated profit of raw materials in the two-week inventory was 124 yuan/ton, turning from a loss to a profit, and the profit margin improved by 206 yuan/ton compared with the previous month; The estimated profit of raw materials in the four-week inventory was 77 yuan/ton, turning from a loss to a profit, an improvement of 278 yuan/ton from the previous month. It can be seen that with the phased rebound of market prices and the gradual recovery of raw material prices, the longer the inventory cycle, the lower the cost, and the greater the profit improvement.
Fig.2 Changes in the gross profit level of different raw materials in the inventory cycle of tertiary rebar
Based on the gross profit performance of each variety measured by the four-week raw material inventory, with the gradual bottoming out of the raw material price in the early stage, the market price rebounded in stages, and the gross profit of each variety in the four-week inventory of raw materials measured in April improved; According to the monitoring data of Lange Iron and Steel Research Center, the average monthly profit margin of the seven major varieties monitored is 50-266 yuan, all of which have turned from losses to profits.
Fig. 3 Gross profit level of major steel products (surrounding raw material inventory).
In general, under the combined influence of the phased rebound in steel prices and the phased bottom rebound in raw material costs, it is expected that the profit data released by the steel industry statistics in April 2024 will improve.
In April 2024, the price of steel raw materials bottomed out and rebounded, and the cost gradually moved up
Since April, downstream demand has gradually recovered, steel prices have rebounded in stages, steel mills' production enthusiasm has rebounded to a certain extent, and iron ore prices have shown a volatile upward trend. According to the monitoring data of Lange Iron and Steel Network, as of the end of April, the price of 66% grade dry base iron concentrate powder in Tangshan was 1060 yuan/ton, an increase of 130 yuan/ton from the end of last month; In terms of imported iron ore, the market price of Australia's 61.5% fine ore in Rizhao Port was 870 yuan/ton, up 110 yuan/ton from the end of last month. On average, the average price of iron ore fluctuated slightly in April. The average price of 66% grade dry-based iron concentrate in Tangshan was 1009 yuan/ton, the same as that of the previous month; In terms of imported iron ore, the average market price of Australia's 61.5% fine ore in Rizhao Port was 845 yuan/ton, up 13 yuan/ton from the previous month.
In terms of coke, since April, coke prices have experienced one round of reductions and three rounds of increases. According to the monitoring data of Lange Steel Network, as of the end of April, the price of secondary metallurgical coke in Tangshan was 1,900 yuan/ton, an increase of 200 yuan/ton from the end of last month. From the average value, the average price of secondary metallurgical coke in Tangshan in April was 1,710 yuan/ton, down 190 yuan/ton from the previous month, or 10.0%.
In terms of scrap, scrap prices showed a volatile upward trend in April. According to the monitoring data of Lange Steel Network, as of the end of April, the price of heavy waste in Tangshan was 2,590 yuan/ton, an increase of 120 yuan/ton from the end of last month. From the average point of view, the average price of heavy waste in Tangshan in April was 2,540 yuan/ton, down 53 yuan/ton from the previous month.
Driven by the decline in the average price of coke and scrap, the average monthly cost level continued to decline. According to the cost monitoring data of Lange Steel Research Center, the cost index of Lange pig iron, measured using the production of raw fuel purchased in April, was 116.7, down 2.6% from the same period last month; The average cost of carbon billet excluding tax decreased by 53 yuan/ton compared with the same period last month, a decrease of 1.8% month-on-month. However, with the stabilization and recovery of raw material prices, the month-end cost increased significantly month-on-month; At the end of April, the average cost of carbon billet excluding tax increased by 226 yuan/ton compared with the same period last month, an increase of 8.3% month-on-month.
In May 2024, steel companies can still maintain a certain profit
From the perspective of the foreign environment, the global manufacturing PMI global manufacturing PMI operation situation has declined, indicating that the global economic rebound in the early stage is facing certain pressure, and the external demand situation is under pressure.
From the perspective of the domestic environment, with the intensification of macroeconomic regulation and control, the policy effect has continued to appear, production demand has risen steadily, employment prices have been generally stable, market confidence has been continuously enhanced, and the national economy has continued to rebound. At present, large-scale equipment renewal, consumer goods trade-in action plans, as well as ultra-long-term special treasury bonds and other measures are being accelerated, which will consolidate and enhance the domestic economic recovery momentum.
From the supply side, the profits of iron and steel enterprises have been repaired to a certain extent, driving the willingness of enterprises to release production capacity gradually increasing, and it is expected that domestic steel production in April will rebound slightly month-on-month. According to the estimate of Lange Steel Research Center, the daily output of crude steel in the country may remain at the level of about 2.9 million tons in April. Steel production in May is expected to show a relatively high release trend.
From the demand side, in May, with the increasing rainy season in the south, it may have a certain restriction on the construction progress of construction projects, and the release of construction steel demand may face pressure. In terms of manufacturing, the prosperity has declined slightly, but it is still running in the expansion range, driven by automobiles, home appliances, ships and other industries, the demand for steel in the manufacturing industry will remain resilient.
From a policy point of view, the implementation of the national policy of steady growth has been continuously strengthened, major ministries and commissions, provinces and cities have actively promoted the "Action Plan for Promoting Large-scale Equipment Renewal and Consumer Goods Trade-in", special bond issuance, ultra-long-term special treasury bonds and other measures are also accelerating the implementation, and various localities have continuously relaxed real estate purchase restrictions; Recently, the Political Bureau of the CPC Central Committee held a meeting and pointed out that it is necessary to make efforts to effectively implement the macroeconomic policies that have been determined, and to implement a positive fiscal policy and a prudent monetary policy. Among them, it is clear that it is necessary to issue and make good use of ultra-long-term special treasury bonds as soon as possible, and accelerate the issuance and use of special bonds, which releases a signal to accelerate the issuance and use of government bonds and maintain steady growth, and market expectations and confidence have been further boosted.
On the whole, with the continuous implementation of policies, the availability of funds for major projects, the promotion of equipment renewal and the trade-in of consumer goods, the market mentality has stabilized; The rainy season is gradually coming, the release of demand is under pressure, and the steel output is still high after the profit repair, but under the joint influence of the gradual increase in cost support, the big data AI-assisted decision-making system of Lange & Tengjing Iron and Steel predicts that the domestic steel market may show a slight rebound in May 2024.
From the cost side, as the price of raw materials bottoms out, the production cost of steel mills has gradually moved up. Lange Steel Research Center expects that steel companies will still maintain a certain profit in May 2024, but due to the market differentiation, the profitability of some varieties may deteriorate. (Lange Iron and Steel Research Center Wang Guoqing's original article, reprinted must indicate the source)