What is the main reason for the recent surge in steel prices and will it continue? Experts analyze that policies are beneficial to the real estate industry, driving steel prices upwards. At the same time, the sharp increase in raw material prices has provided cost support for steel prices. However, the winter consumption off-season will come or suppress steel prices, and the future market may peak and fluctuate.
The momentum of steel prices is magnificent, with macro efficient support. On November 20th, the Prime Minister was appointed as the Director of the Central Financial Commission. The meeting reviewed and approved the division of labor plan for key tasks related to promoting high-quality financial development. We should focus on improving the quality and level of financial services for economic and social development, while maintaining the stability of monetary policy, and increase support for major strategies, key areas, and weak links. The domestic financial market has generally risen, especially with the introduction of real estate protection and investment policies, driving the rapid rise of the steel industry sector.
The meeting of the Central Financial Commission has reviewed and approved the plan for the division of key tasks related to promoting high-quality financial development; Caixin reported that regulatory agencies are drafting a whitelist of Chinese real estate developers, which may include 50 state-owned and private real estate enterprises, and will receive support from various aspects including credit, debt, and equity financing.
Driven by macro positive factors, the prices of raw materials, especially iron ore, have risen strongly. Iron ore futures continue to maintain a strong trend, rising by over 2%. According to research and analysis conducted by China Steel Network Information Research Institute, although the supply of molten iron is still steadily declining, there has not been a significant correction in iron ore prices. The first reason is that the market’s expectation for the supply of molten iron is to stabilize at over 2.35 million tons; Secondly, the rate of decline in molten iron production is not fast, and the absolute value is still at a relatively high level during the same period in history; Finally, the contradiction of low inventory remains unresolved.
From this, it can be seen that even if there is news about iron ore futures being guided by the window, the actual pullback of market prices is far from expected. The rebound in market profits indicates that the contradiction between “low demand and high prices” of steel may be traded, but it is difficult to assert that the negative feedback market will unfold in the near future. Because the current prices of furnace materials and steel are still in a strong range, it is expected that the switching of market logic will not be smooth.
Following this logic extension, it is difficult for short-term steel prices to decline. The mutual push between raw materials and steel mills circularly drives market prices up. From an industrial perspective, with the continuous introduction of domestic macroeconomic policies, the consumption of steel in infrastructure, manufacturing, and other industries has increased, and the consumer side is expected to maintain resilience in the future. At the same time, the profitability of steel mills has improved recently, with some repaired blast furnaces gradually resuming production. The daily average iron production has remained high for a long time, and the supply is relatively sufficient.
The current macroeconomic policy expectation is temporarily stabilizing. The profits of threads and hot coils have improved, especially the profits of electric furnaces have significantly rebounded. The production of threads and hot coils has rebounded month on month. From the perspective of profit, it is expected that the production of threads and hot coils will gradually rebound. There is little possibility of a downward trend in the price of furnace materials due to speculation in winter storage expectations.
Post time: Nov-24-2023