Beijing, August 15 - Under the dual weak supply and demand situation, the downward pressure on domestic steel prices in China continues to increase recently.

Since the beginning of this week, the futures prices of major steel products such as rebar and hot-rolled coils in China have accelerated their decline, successively setting new lows for the phase.

When will the "endless fall" of steel prices come to an end?

In the view of market insiders, the weak trend of the steel market is likely to remain unchanged in the short term.

The decline in demand for construction steel, the high inventory pressure in the plate market, coupled with the increase in industry defaults, all pose significant challenges to the steel market.

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The future trend of steel prices still needs to closely monitor market supply and demand changes and the impact of related policies.

The downward pressure on steel prices has intensified, and the industry adjustment has continued throughout the year.

The domestic steel market has been facing a situation of weak supply and demand.

Gan Xiayong, Deputy General Manager of the Steel Business Group of Shanghai Steel United, told reporters in an interview that oversupply of steel and insufficient domestic demand are the main themes of the current market.

According to him, the tight funds in the traditional real estate and infrastructure industries have led to an increase in completed projects and a relatively small number of new starts.

Since June, the demand for construction steel has declined significantly.

At the same time, the plate market has seen an increase in new production lines and a decrease in export volumes, leading to high inventory pressure.

"The weakening of spot liquidity has led to a continuous decline in prices, an increase in industry defaults, and a further increase in the pressure of cashing out spot goods due to the reduction in trade financing," added Tang Binghua, a steel researcher at Founder Futures.

Looking at the data, although the inventory reduction speed of rebar is higher than the same period last year, the demand improvement is limited due to weather factors and seasonal impacts.

For the plate market, especially hot-rolled coils, the inventory growth rate is significant, and the market performance is not as expected.

Steel mills are forced to reduce production, "but this has not eased the contradiction between supply and demand in the market, and the negative feedback in the industry continues."

"For rebar, the poor demand is expected," said Chu Xinli, a black researcher at CITIC Construction Futures.

Due to the standard switch of rebar, it has caused a large amount of spot pressure, leading to a rapid decline in prices.

"However, we should also see that the reduction in the supply of rebar is significant, and the overall state continues to reduce inventory, and the fundamental contradiction is gradually easing.

Therefore, after the market sentiment is fully released, the price of rebar is expected to return to the fundamentals."

On the other hand, Chu Xinli believes that the demand resilience of hot-rolled coils is being questioned, and the monthly steel export data in July has further increased market concerns.

According to the data from the General Administration of Customs, although China's cumulative steel exports from January to July were 61.227 million tons, an increase of 10.953 million tons year-on-year, an increase of 21.8%.

However, in July alone, China only exported 7.827 million tons of steel, a decrease of 918,000 tons month-on-month, a decrease of 10.5%.

"From the data, the current overseas demand has declined, and the external demand prosperity continues to decline.

China's steel industry export order index is operating in a contraction range, and the driving force for steel exports is insufficient."

Chu Xinli analyzed that, looking further at the steel enterprise order situation, unlike the high demand for auto and home appliance replenishment in the second half of last year, this year, under the expectation of additional tariffs in the second half of overseas, there is a certain degree of "demand advance" in the export chain of automobiles, home appliances, etc., coupled with the current not low supply level, the possibility of a significant improvement in the peak season's fundamentals is weak, and it is likely to continue the weak improvement pattern.

Overall, Chu Xinli believes that China's steel export price advantage still exists, but the supply of overseas steel markets is increasing year-on-year.

At the same time, the global manufacturing index continues to decline, and the external demand prosperity continues to decline.

China's steel industry export order index is operating in a contraction range, and the driving force for steel exports is insufficient.

Coupled with the appreciation of the renminbi and the anti-dumping investigation of China's hot-rolled coil plate by Vietnam, it may restrict steel exports.

The timing of the bottom of negative feedback needs to pay attention to the changes in raw material supply.

Although facing the pressure of demand negative feedback, and the domestic pig iron output has also declined, the signal of the bottom of the steel industry chain has not yet appeared.

However, the market still has expectations for the upcoming traditional peak season and later policies.

In this context, market insiders generally believe that short-term steel prices may continue to be weakly organized.

According to the research of Langge Steel Network, as of the week of August 14, the daily average output of pig iron of 201 production enterprises in the country was 2.1375 million tons, a decrease of 108,000 tons week-on-week, and a total decrease of 723,000 tons month-on-month.

"Considering that there is still some expectation of demand improvement, referring to the calculation of key raw material costs, the cost of rebar and hot-rolled coils before the peak season may be supported at around 2900/ton and 3100 yuan/ton."

Tang Binghua said, but historically, the final link of negative feedback in the black metal market is usually to force a reduction in raw material supply.

However, looking at the current situation, the current negative feedback is still in the stage of steel mill production reduction, and the reduction of raw material supply has not yet appeared, "so the price is difficult to see the bottom in the short term."

Tang Binghua believes that by October, if the demand has not yet bottomed out, the market will enter the stage of raw material production reduction.

Reflecting on the change of steel prices, "recent capital relocation has made steel prices enter an accelerated bottoming stage.

After the relocation is over, the market may turn to trading peak season demand and the fourth quarter of domestic and foreign policies."

Tang Binghua said, but only the short-term rebound of rebar demand and the medium-term decline of raw material supply mean that the signal of the bottom of steel prices has been confirmed.

Gan Xiayong also expressed a similar view.

He expects that the downward trend of steel market prices in the short term has not ended.

He explained that the signs of demand warming up are currently limited: the real estate industry continues to be sluggish, which is the main reason for the weak market demand; at the same time, the overall growth rate of domestic infrastructure investment is still less than expected, and it is difficult to provide effective support for steel demand.

The profits of the current steel industry are further compressed, "unless the market appears to support policies, the confidence of the industry is likely to recover."

Chu Xinli further pointed out that the global demand slump will continue to drag down China's steel exports.

Although the demand for steel in the Asian region has improved, it is not enough to completely alleviate the pressure of the domestic market.

The appreciation of the renminbi and the intensification of trade protectionism both restrict China's steel exports.

"In the short term, the growth momentum of steel exports is insufficient, and the contradiction between supply and demand still exists."

"In the long run, the bottom signal of steel prices has not yet fully appeared."

Tang Binghua added that the future direction of prices will depend on the changes in raw material supply and the impact of domestic and foreign policies.