Why the steel market so strong recently?
Entering the winter season, it was originally a low season for steel sales, but the financial reporters found that in the past month or so, the price of the most important steel-rebar which has been rising. Till November 30, the national spot price of rebar averaged RMB4145/MT(about USD592/MT) , an increase of 260 yuan per ton from the beginning of the month.
The financial reporters saw in several steel storages that there is not much steel stock. Related information shows that in November 2019, rebar stocks in 20 cities across the country fell by more than 20% from the previous month, a new low since 2013. At the same time, the total inventory of the national steel market was 9.87 million tons, down 15.9% month-on-month and a new low in the past two years.
What are the reasons for this?
* Expert analysis shows that this round of rebar has driven the prices of several varieties of steel products up, mainly due to the mismatch between supply and demand. In terms of total steel output, in the first 10 months of 2019, national crude steel output was 82.922 million tons, a year-on-year increase of 7.4%, and the total market was abundant.
* Li Xinchuang, President of the Metallurgical Industry Planning and Research Institute said, the products corresponding to the production-limited enterprises are mainly long products, which will cause certain fluctuations in steel prices to a certain extent, but in general he think that China's steel production capacity and the production level of China's mills/factories are sufficient to ensure domestic demand.
* Experts also expressed the profit margin of steel companies' sales remains low. Although steel prices have risen recently, steel companies have a certain profit margin, but from the perspective of the whole year, the profit margins of steel companies still remain low.
However, experts said that due to the short supply of the rebar market and the impact of high prices, iron and steel companies have certain favorable factors. As supply recovers in the market, prices will return to rationality.
At present, the cumulative rise in steel product prices may show an upward trend after the weakening of upward momentum. It is expected that after the Spring Festival next year, driven by investment demand, domestic steel product prices are expected to usher in rising prices.