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In the steel industry, 2012 marked a dramatic shift, with prices experiencing a strong rebound amid challenging conditions. The term "passion and summer" was used to describe the surge in steel prices across the board. According to market monitoring data, on July 12, the Business Club Steel Index reached 932 points, up by 2 points from July 11 and 15 points, or 1.63%, compared to July 1. This was 1057 points higher than the peak of the cycle on February 21, 2013, but still 11.83% lower than that high. It was also 12.70% above the 827 points recorded on September 9, 2012. (Note: The period refers to January 1, 2011, to the present). Year-on-year, it had dropped by 25 points, or 3.02%.
Rebar prices saw a significant rally, rising for 22 consecutive days since late June, with an increase of over 100 yuan per ton, or 3.74%. As of July 12, the average price of 16mm third-grade rebar stood at 3,337.14 yuan per ton, reflecting a 0.45% increase from July 8.
Looking at the main contract settlement prices, the steel market showed a clear upward trend after a decline in early May. After a brief correction, prices began to rise again starting on June 26, driven by spot price increases. By early July, prices had reached a peak and returned to levels seen in early May. As of July 11, the main contract settlement price for rebar was 3,659 yuan per ton, up 224 yuan per ton from June 26, marking a 6.52% increase over 16 consecutive days. The increase in futures prices outpaced the spot market.
The iron ore, billet, and steel industry chain as a whole experienced an upward trend. Iron ore prices started rising on June 27, reaching 871 yuan per ton by July 12, up 5.58% from June 27. Billet prices also rose during the same period, with the average carbon billet price in Tangshan reaching 3,030 yuan per ton, up 3.06% from June 27. In the commodity price report for the 27th week of August 2013, 12 categories of steel products saw month-on-month price increases, led by seamless pipes (1.87%), medium-thick plates (0.94%), and hot-rolled coils (0.86%). Only galvanized sheets fell by 0.37%, with an overall average increase of 0.51%.
This rally represented the first large-scale and widespread recovery in the past four months. A key driver was the drop in social inventory of steel products, which remained below the same period last year after 16 weeks of decline. As of July 5, the total steel inventory in major cities nationwide was 164.99 million tons, down 411,200 tons from the previous week, showing a significant reduction. Steel mill inventories also declined, with the China Iron and Steel Association reporting a decrease of 874,000 tons from the end of last year.
Additionally, the shortage of certain steel specifications and rising raw material prices, such as billets and imported iron ore, provided further support to steel prices. As of July 11, Tangshan billet stocks continued to fall to 552,800 tons, down 63,900 tons from the previous period. While some companies recently reported increased demand, this contributed to the price rise.
Environmental regulations have also tightened, leading to production halts and maintenance at many steel mills. As of July 12, 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 affected rebar and wire rod output, with coiled Screw production declining by about 50 tons.
Despite these favorable factors, recent data from the China Iron and Steel Association shows that crude steel production by key enterprises increased significantly. At the end of June, the daily crude steel output of key enterprises reached 1.762 million tons, up 17,000 tons from the previous month, or 0.97%. Nationally, the average daily crude steel output was 2,181,200 tons, up 17,000 tons, or 0.78%. This increase in production tested market demand and put downward pressure on steel prices.
Macroeconomic fundamentals remain unstable, with the industrial sector facing deflationary pressures. Major steel-consuming industries like automobiles and home appliances are in off-season, yet crude steel output in June rose instead of falling. This has intensified the supply-demand imbalance. Meanwhile, China's exports have slowed, with the growth rate dropping by 2% in June, exacerbated by weak global demand outside the U.S.
As the downstream of the steel industry, mechanical and electrical product exports saw a 10.7% increase in the first half of the year, but the growth rate fell by 3.5% compared to January to May. In June, both import and export volumes of steel products declined month-on-month, and trade tensions in the steel sector continue to rise.
He Hangsheng, an analyst at the Business Club’s steel division, concluded that steel prices are expected to rise in the short term, but the pace will be limited. Prices may continue to climb in the first half of next week before a pullback. The market remains volatile, with no clear reversal yet, but the downside potential is also limited. He recommends monitoring steel mill production cuts and maintenance activities. Overall, the steel market is expected to remain volatile in July and August.