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China stainless steel factory

Supply and demand are warming up, and steel prices may continue to be strong in the future

In May 2024, the price of rebar futures fell first and then rose, and the center of gravity moved up. As of the close of May 24, the closing price of rebar RB2410 was 3,788 yuan/ton, up 2.46% month-on-month. The spot prices of rebar in the north and south also rose, and the basis fluctuated slightly. After the steel market emerged from the volatile market in 2022 and 2023, it generally operated in the volatile range in 2024, but the internal supply and demand structure has undergone major changes. The first is the structural change of raw materials, and the second is the structural change of demand leading to the structural change of steel. In general, the factors driving the change of rebar market have changed from being supported by costs to being driven by their own supply and demand relationship.
From the perspective of raw materials, the supply and demand relationship of iron ore has changed from tight to loose, the supply and demand of coke has maintained a tight balance, and the cost support has weakened.
In the early stage, the price of iron ore continued to be high, the global supply of iron ore increased, and my country’s iron ore imports increased. According to statistics from the General Administration of Customs, in April, my country imported 101.818 million tons of iron ore and its concentrate, a year-on-year increase of 12.6%. From January to April, my country imported 411.821 million tons of iron ore and its concentrate, a year-on-year increase of 7.2%. From the perspective of shipment, driven by the end-of-fiscal-year rush target, the shipment volume of Australian mines has maintained an upward trend. Therefore, the domestic import volume of ore arriving at the port will increase steadily. The supply and demand relationship of iron ore has gradually changed from the previous tight pattern to a loose pattern.
Coking coal maintains a tight balance. According to data from the National Bureau of Statistics, from January to April, the national coking coal output was 158 million tons, a year-on-year decrease of 2.1%. After the Spring Festival, affected by the negative feedback of the black series industrial chain, coking enterprises have poor profits and limited production. Starting from April, the price increase of coking coal has been implemented, coking enterprises have turned losses into profits, and the enthusiasm for starting work has increased. Coking coal production will increase month-on-month in May. Although coking coal is at a low inventory level, the steady growth of coking coal imports has made up for the reduction in domestic supply. The supporting role of the raw material end on steel prices has weakened.
The supply and demand of rebar has improved, the production of rebar has decreased significantly, and the drag effect of the real estate market has gradually weakened.

From the perspective of the supply and demand of steel, data from the National Bureau of Statistics showed that in April, my country’s crude steel output was 85.94 million tons, a year-on-year decrease of 7.2%; pig iron output was 71.63 million tons, a year-on-year decrease of 8.0%; steel output was 116.52 million tons, a year-on-year decrease of 1.6%. From January to April, my country’s crude steel output was 343.67 million tons, a year-on-year decrease of 3.0%; pig iron output was 284.99 million tons, a year-on-year decrease of 4.3%; steel output was 451.03 million tons, a year-on-year increase of 2.9%. The output of crude steel and pig iron has both fallen year-on-year, and the overall supply of steel has declined.

In terms of demand, export data continued to improve, infrastructure data supported the bottom, and machinery, automobiles, shipbuilding, and home appliances data performed well. Although the real estate market has not seen a significant improvement, its impact on demand has weakened.
In terms of exports, the latest data from the General Administration of Customs showed that my country exported 9.224 million tons of steel in April, a decrease of 664,000 tons from March and a month-on-month decrease of 6.7%. From January to April, my country exported a total of 35.024 million tons of steel, a year-on-year increase of 27.0%. International market demand remained strong, and steel exports increased year-on-year.

In terms of infrastructure, data released by the National Bureau of Statistics showed that from January to April, the national fixed asset investment (excluding farmers) was 143401 billion yuan, a year-on-year increase of 4.2%. Among them, infrastructure investment (excluding electricity, heat, gas and water production and supply industries) increased by 6.0% year-on-year.

In terms of automobiles, according to data from the China Association of Automobile Manufacturers, in April, the production and sales of passenger cars were 2.048 million and 2.001 million respectively, down 9% and 10.5% month-on-month, and up 15.2% and 10.5% year-on-year respectively. Among them, the domestic sales volume of passenger cars was 1.572 million units, a decrease of 13.2% month-on-month and an increase of 5.1% year-on-year; the export volume of passenger cars was 429,000 units, an increase of 1.2% month-on-month and an increase of 35.9% year-on-year. From January to April, the domestic sales volume of passenger cars was 6.15 million units, an increase of 5.9% year-on-year; the export volume of passenger cars was 1.539 million units, an increase of 34.8% year-on-year. Overall, the domestic sales volume of passenger cars fell month-on-month, but maintained year-on-year growth, and exports continued to perform well.
In terms of shipbuilding, data from the National Bureau of Statistics showed that the output of civil steel ships from January to March was 13.04 million tons, an increase of 23.6% over the same period last year. At present, the shipbuilding industry has entered a cycle of order growth, and it is expected that the demand for steel will continue to be driven in the future.
In terms of real estate, real estate data continued to be sluggish in 2024, and no obvious signs of recovery and rebound were shown. According to the data from the National Bureau of Statistics, from January to April, the national real estate development investment was 3092.8 billion yuan, a year-on-year decrease of 9.8% (of which residential investment was 2339.2 billion yuan, a year-on-year decrease of 10.5%); the housing construction area of ​​real estate development enterprises was 6875.44 million square meters, a year-on-year decrease of 10.8% (of which residential construction area was 4806.47 million square meters, a year-on-year decrease of 11.4%); the newly started housing area was 235.10 million square meters, a year-on-year decrease of 24.6% (of which residential newly started area was 170.06 million square meters, a year-on-year decrease of 25.6%); the completed housing area was 188.60 million square meters, a year-on-year decrease of 20.4% (of which residential completed area was 137.46 million square meters, a year-on-year decrease of 21.0%).
From this, it can be seen that real estate is still dragging down steel demand, and the reduction in rebar production is also quite obvious. The latest data from the National Bureau of Statistics shows that in April, China’s steel bar production was 16.343 million tons, a year-on-year decrease of 21.7%; the production of medium and thick wide steel strips was 18.204 million tons, a year-on-year increase of 1.9%.
In terms of inventory, steel inventory has returned to a low level in recent years. According to statistics, as of May 24, the national steel inventory of steel companies was 5.56 million tons, a year-on-year decrease of 0.2% and a month-on-month decrease of 1.9%. It is lower than the same period in 2022 and 2021.
In summary, the author expects that the profits of steel companies will rebound in the future. With the recent release of real estate stimulus policies, the biggest negative impact has gradually weakened. The author believes that steel prices may continue to be strong in the future.

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