'Golden nine' steel market can rebound?

2024-09-14

In August, China's steel market continued to show a shocking downward trend due to factors such as high temperature and rainy extreme weather, obvious lack of downstream demand, still large supply-demand contradiction, downward price of raw fuels and enhanced negative cost-reversal effect.

Data from Lange Steel Network shows that by the end of August, the national steel composite price reached RMB 3,532 per tonne, down RMB 141 per tonne, or 3.8%, compared with the end of July. From the perspective of monthly average, in August, the national steel composite price averaged RMB 3,551/tonne, down RMB 275/tonne, or 7.2% from a year earlier.

Into September, macro policies will accelerate the landing, promote the ‘two new’ work and other measures will also come into effect. At the same time, with the improvement of weather conditions in September tour demand is expected to recover, the market supply and demand relationship is expected to improve. I expect that in September, China's steel market will show a rebound trend!

According to statistics, as of the end of August, 2024 China's local government new special debt issuance scale reached 24,268.0 billion yuan, accounting for 62.2 per cent of the total amount of all issuance, an improvement of 17.7 percentage points from the end of July. It can be seen that the issuance of special bonds is currently accelerating. According to the past example, the local generally in October of the year to complete the special bond issuance, from the current bond issuance progress, is expected in September special bond issuance tempo will be further accelerated.

At present, the domestic steel market is gradually converted to the peak season, the downstream engineering construction has accelerated, coupled with the recent slight rebound in Steel Prices make part of the terminal inventory demand release, the market turnover has improved. Into the ‘golden nine’, with the further improvement of weather conditions, the construction progress of key projects will be accelerated, is expected to construction steel demand will pick up.

From a comprehensive point of view, in the macro-policy continues to show results, the supply side of the low level of operation, the demand side of the stabilisation of the recovery, supply and demand relationship is expected to improve the strong impact of factors such as the ‘Golden Nine’ steel market is expected to swing the degree of rebound.

However, into September, some constraints on the market continued rebound factors must be noted. On the one hand, the price of raw fuels running weak, insufficient support for the steel market. in August, coke prices experienced 6 rounds of adjustments, a total decline of 300 yuan / tonne; iron ore, scrap average price has also moved down. On the other hand, the manufacturing boom continued to decline, production index, new orders index, new export orders index are in the contraction zone, is expected to manufacturing steel demand will be under pressure. In addition, the steel export power is insufficient, the export orders index fell back significantly, is expected to face pressure on exports later.