Review of 2023, the steel market is moving forward amid shocks

Looking back on 2023, the global macroeconomy is generally operating weakly, strong domestic market expectations collide fiercely with weak reality, steel production capacity continues to be released, downstream demand is generally weak, external demand performs better than domestic demand, and steel prices show a rebound, fluctuating downward trend.
Looking at it separately, in the first quarter of 2023, the prevention and control of the new crown epidemic has stabilized, and improved macroeconomic expectations have pushed steel prices upward; in the second quarter, the U.S. debt crisis has emerged, the domestic economy has been weak, the supply and demand contradiction has intensified, and steel prices have plummeted; In the third quarter, the game between strong expectations and weak reality intensified, and the steel market fluctuated and operated weakly; in the fourth quarter, macroeconomic expectations improved, capital became stronger, steel supply slowed down, and cost support remained, and steel prices began to stop falling and rebound.
In 2023, the average comprehensive price of steel in my country will be 4,452 yuan/ton, a decrease of 523 yuan/ton from the average price of 4,975 yuan/ton in 2022. The year-on-year price decreases from large to small are section steel, special steel, steel bars, thick plates, and hot-rolled steel. products and cold rolled products.
Overall, in 2023, my country’s steel market will mainly present the following characteristics:
First, steel production overall remains high. According to data from the National Bureau of Statistics, from January to November 2023, my country’s crude steel output reached a cumulative 952.14 million tons, a year-on-year increase of 1.5%; pig iron output reached a cumulative 810.31 million tons, a year-on-year increase of 1.8%; steel production reached a cumulative 1,252.82 million tons, A year-on-year increase of 5.7%. It is estimated that my country’s crude steel output will reach about 1.03 billion tons in 2023, a year-on-year increase of 1.2%.
Second, steel exports have increased significantly, becoming the key to balancing domestic supply and demand. In 2023, domestic steel prices will have obvious price advantages, overseas orders will be sufficient, and exports will increase significantly. Statistics from the General Administration of Customs show that from January to November 2023, my country exported 82.66 million tons of steel, a year-on-year increase of 35.6%. The China Iron and Steel Industry Association predicts that my country’s steel exports will exceed 90 million tons in 2023.
At the same time, my country’s rich variety of high-quality and low-price steel products supports downstream industries to participate in international competition, and the large number of manufacturing exports drives indirect exports of steel. It is estimated that in 2023, my country’s indirect steel export volume will be approximately 113 million tons.
Third, downstream demand is generally weak. In 2023, my country’s economy will recover steadily, but CPI (consumer price index) and PPI (industrial product factory price index) continue to run at low levels, and the growth rate of fixed asset investment, infrastructure investment, and manufacturing investment is relatively low. Affected by this, the overall steel demand in 2023 will be weaker than in previous years. It is estimated that my country’s crude steel consumption will be approximately 920 million tons in 2023, a year-on-year decrease of 2.2%.
Fourth, costs are operating at high levels and the profitability of steel companies continues to decline. Although coal and coke prices will decline in 2023, steel companies are generally under greater cost pressure due to the continued high price of iron ore. Data shows that as of the end of 2023, the average cost of molten iron for domestic steel companies has increased by 264 yuan/ton compared with the same period in 2022, an increase of 9.21%. As steel prices continue to fall and costs rise, profits of steel companies have shrunk significantly. In 2023, the sales profit margin of the steel industry will be at the bottom level of major industrial industries, and the industry’s losses will continue to expand. Statistics from the Iron and Steel Association show that in the first three quarters of 2023, the operating income of key steel companies was 4.66 trillion yuan, a year-on-year decrease of 1.74%; operating costs were 4.39 trillion yuan, a year-on-year decrease of 0.61%, and the revenue decline was 1.13 larger than the operating cost decrease. percentage points; total profit was 62.1 billion yuan, a year-on-year decrease of 34.11%; sales profit margin was 1.33%, a year-on-year decrease of 0.66 percentage points.