Steel prices staged "Passion and Summer"

In the steel industry, 2012 marked a dramatic shift, with prices experiencing a sharp rebound under challenging conditions. The overall market saw a widespread increase in steel prices, often referred to as "passion in summer." According to data from the Business Club's steel index, on July 12, the index reached 932 points, up 2 points from July 11 and 15 points, or 1.63%, from July 1. This was also 1057 points higher than the peak recorded on February 21, 2013, but still 11.83% lower than that high. Compared to the 827 points on September 9, 2012, it was 12.70% higher. The year-on-year decline stood at 25 points, or 3.02%, since December 1, 2011. Rebar prices showed a strong upward trend, especially after 22 days of robust sales. Since late June, the rebar market experienced a significant rally, rising for 22 consecutive days and increasing by over 100 yuan per ton, or 3.74%. As of July 12, the average price of 16mm third-grade rebar was 3,337.14 yuan per ton, an increase of 0.45% compared to July 8. Looking at the futures market, the main contract settlement price of ** (a key steel product) rose significantly starting in early June after a one-month decline from May. Following several days of correction, the price began to climb again on June 26, driven by rising spot prices. By early July, prices hit a peak and returned to levels seen in early May. As of July 11, the main contract settlement price for ** had reached 3,659 yuan per ton, up 224 yuan from June 26, a 6.52% increase over 16 consecutive days. Notably, the price increase outpaced the rise in spot prices. The iron ore, billet, and steel industry chain also showed an overall upward trend. Iron ore prices started rising on June 27, with the average price of 62% imported iron ore reaching 871 yuan per ton by July 12, up 5.58% from June 27. Similarly, billet prices increased in late June, with the average carbon billet price in Tangshan at 3,030 yuan per ton, a 3.06% increase from June 27. In the broader steel market, different products saw varying gains. According to the business club’s price report, during the 27th week of August 2013 (July 8–12), 12 categories of steel products saw monthly increases, with seamless pipes leading at 1.87%, followed by medium-thick plates (0.94%) and hot-rolled coils (0.86%). Only galvanized sheets saw a slight decrease of 0.37%. The overall average change was 0.51%. This rally represented the first major and widespread recovery in the four months following a downturn. A key driver was the drop in social inventory of steel products, which fell below the same period last year after 16 weeks of decline. As of July 5, the total stock of five major steel products in cities across the country was 164.99 million tons, down 411,200 tons from the previous week. Steel mill inventories also declined, with the China Iron and Steel Association reporting a reduction of 874,000 tons from the end of the previous year. Additionally, shortages in certain specifications and rising raw material prices, such as billets and imported iron ore, supported steel prices. As of July 11, Tangshan billet stocks continued to fall to 552,800 tons, down 63,900 tons from the previous period, and 1,423,100 tons less than the peak in mid-March. Some companies even reported increased demand, pushing billet prices higher. Environmental regulations have also tightened recently, with many steel mills suspending production or reducing operations due to non-compliance. According to the business agency’s monitoring, blast furnace inspections affected the production of molten iron by approximately 650,000 tons, while sheet metal maintenance impacted output by about 400,000 tons. Maintenance of steel production lines also reduced output of rebars and wire rods, affecting coiled screws by around 50 tons. Despite these positive factors, there are growing concerns about the sustainability of the current price trends. According to the latest statistics from the China Iron and Steel Association, key enterprises produced 1.7624 million tons of crude steel daily at the end of June, a 0.97% increase from the previous period. Nationally, the average daily crude steel output was 2.1812 million tons, up 0.78%. In mid-June, the average daily output was estimated at 2.164 million tons, 0.37% higher than the first half of the year. Since the short-term dip in mid-May, crude steel production has been rising for three consecutive days. This continued increase in crude steel output puts pressure on market demand and creates downward pressure on steel prices. The macroeconomic fundamentals remain unstable, particularly in the industrial sector, where deflationary pressures persist. Major steel-consuming industries like automobiles and home appliances are in off-season, yet crude steel output has not decreased but instead increased. This has intensified the supply-demand imbalance. Additionally, China’s foreign trade exports have gradually declined, with the growth rate dropping by 2% in June. Outside the U.S., major economies face weak demand, further complicating the situation. At the downstream end of the steel industry, mechanical and electrical product exports grew by 10.7% in the first half of the year, but the growth rate slowed by 3.5% from January to May. In June, both imports and exports of steel products declined month-on-month, and trade tensions in the steel sector continue to rise. In conclusion, He Hangsheng, an analyst at the Business Club’s steel division, believes that steel prices will likely continue to rise in the short term, albeit with limited gains. Prices may continue to climb during the first half of next week, followed by a potential pullback. The market remains flexible, and a complete reversal is not yet in sight. However, the space for a significant decline is also limited. Investors are advised to monitor production cuts and maintenance activities at steel mills. Overall, the steel market is expected to remain volatile in July and August.

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