Steel industry weakening recently?

2024-09-20 09:09:08

The steel industry PMI (Purchasing Manager's Index) investigated and released by the Steel Logistics Committee of the China Federation of Iron and Steel Industries (CFSI) showed that the steel industry continued to weaken in August, at 40.4%, down 2.1 percentage points from the previous month.

Changes in sub-indexes show that the steel industry off-season characteristics are still relatively obvious, the market demand downward continued, steel production has been scaled back, steel mills continue to increase inventories, raw material prices are running low, steel prices bottomed out. It is expected that in September, driven by the expectation of a peak season of demand, market demand will pick up, steel production will grow slightly, and both raw material and steel prices will rise.

Off-season characteristics are still more obvious, and the downward trend in demand has continued.

In August, the hot and rainy weather continued in many places in China, and the suppression of demand in the steel market still exists, and the off-season characteristics of the steel industry are still relatively obvious.

Steel industry new orders index was 38.5%, down 1.8 percentage points from July, has fallen to a lower level, showing that the current downward trend in demand for steel market has continued.

It is understood that the building materials market demand performance in August was flat, and many markets continue to contract. According to the monitoring of the Shanghai terminal wire screw procurement data, in August, Shanghai terminal purchases declined slightly, down 7.4% from the previous year. It should be noted that at the end of August, driven by the expectation of the traditional peak season, the purchasing end of the market showed signs of rebound.

Steel production was curtailed and steel mill inventories continued to increase.

In August, due to the weaker market demand, the enterprise production enthusiasm is not enough, coupled with the old and new national standard conversion, some enterprises spontaneously overhaul and reduce production and other factors, the overall steel production has been scaled down. 34.9% of the production index in August, compared with July fell 3.6 percentage points, for three consecutive months of sequential decline. China Iron and Steel Industry Association data show that in the first half of August, the key statistical iron and steel enterprises produced 2.034 million tonnes of crude steel per day, an increase of 1.52%; 1.8418 million tonnes of iron per day, an increase of 2.92%; 1.839.1 million tonnes of steel per day, a decline of 7.07%. By mid-August, daily crude steel production of 1,993,400 tonnes, down 0.50%; daily iron production of 1,823,100 tonnes, down 1.02%; daily steel production of 1,878,800 tonnes, up 2.16%.

Overall, steel production activity in August showed a downward trend, and of particular concern is the fact that steel production in early and mid-August was significantly lower than the same period last year.

In addition, although both supply and demand were weak in August, the accelerated sell-off of ‘old GB’ products made the contradiction between supply and demand more prominent, and the effect of steel de-stocking was poor. 50.6% of finished goods inventory index in August, although down from the previous month, but still above 50%, indicating that steel mills' inventories continued to increase.

Steel Association data show that in mid-August, the key statistical steel enterprise inventory of 16,453,900 tonnes, an increase of 553,400 tonnes over the first half of August.

The purchasing side declined again, with raw material prices running low.

In August, with the production side of the contraction, raw material procurement also showed a more pronounced decline, purchasing volume index of 40.6 per cent, down 7.4 percentage points from July, down to a lower level. The downturn in purchasing made raw material prices continue to weaken under pressure. The purchasing price index stood at 19.6 per cent, down 1.2 percentage points from July, and at a low level of around 20 per cent for the second month running. By category, the iron ore market experienced an accelerated downward trend in the early part of the year, with prices falling at a slower pace. Coke experienced several rounds of price reductions. The scrap market also continued to go down, and after losing the support of reverse invoicing, there was even an accelerated compensatory decline.

Steel prices bottomed out and rebounded, currently still at a lower level.

In August, due to the weakening of the demand side, coupled with the more prominent contradiction between supply and demand, steel prices also showed a downward trend. Shanghai rebar price index shows that the price was 3202 yuan / tonne on August 2, after which the price continuously lowered, and fell to 3043 yuan / tonne on August 15, which is not only the lowest point at the end of August, but also hit a new low since 2018. After that, stimulated by the demand season is expected to bottom out and rebound, prices bottomed out and rose for many consecutive days, and prices rebounded to 3,214 yuan / tonne on August 27, the first time in nearly three months to achieve intra-month gains. Although the steel price decline in August all recovered, compared with previous years, the current steel prices are still at a lower level.

It is expected that in September, the steel market demand has picked up.

In September, the impact of high temperature and rainy weather around the world will gradually subside, the traditional peak season of the steel industry is coming, downstream demand has a better foundation for recovery. In addition, external factors will also have a certain positive impact on steel commodities, the Federal Reserve interest rate cut probability increase, to the global capital liquidity to bring incremental, the domestic probability of continuing to maintain liquidity easing, and from the stage of the financial market regulation policy, directional regulation, special regulation or become the norm, which will help to solve the current liquidity downward precipitation of the difficult problem, favourable to the commodities market.

Overall, the steel market demand is expected to pick up in September.

Steel production increased slightly.

In August, a number of steel enterprises took the initiative to open the overhaul of production cuts and other actions. In September demand is expected to pick up the situation, the previous production cuts maintenance will be the end, coupled with the current low prices of raw materials, the previous production cuts in the enterprise or will resume production in September one after another. Steel production is expected to grow slightly in September.

Raw materials and steel prices are rising.

Raw material prices after a sustained downward trend in the previous period, the current downward space has been little, plus the demand side of the expected improvement in September, corporate production rebound, raw material purchases will also grow, driven by raw material prices rose. Current steel prices fluctuate at low levels, but with the expected improvement, as well as the selling wave gradually reached the end, is expected in September steel prices also have a certain recovery space.