Steel industry caught in ‘price spiral’
Recently, the steel market is hot, steel prices continue to rise. According to incomplete statistics, since this month, the price of domestic mainstream construction steel has risen by more than 600 yuan/ton, equivalent to an increase of more than 25%. The pace of price increases in some steel mills is “running fast “, and a new round of price increases will be issued every week or even every few days.
This steel price “surge” situation, so that many steel end users such as fire, ordinary building materials manufacturers, construction side worried. After all, in the case of no fundamental changes in the supply and demand of steel, why did steel prices soar so much, and what caused the steel market to be so “lost “?
Soaring upstream raw material prices are the main cause
From the overall situation analysis, the current round of steel price surge mainly stems from the raw material end, especially the price of iron ore and coke continued to rise.
Since the beginning of this year, iron ore prices have continued to rise, driven by multiple factors such as supply constraints in overseas mines and the gradual recovery of the operating rate of domestic steel enterprises. According to industry insiders, from January to April this year, the average spot price of iron ore in the world’s major mines rose by more than 20% compared with the same period last year, of which 62% of iron ore spot price is about 850 yuan/ton.
The coal coke market is also hot, and the price of thermal coal and coke has also risen steadily this year. Taking thermal coal as an example, as of mid-April, the price of thermal coal around the Bohai Sea has climbed to about 1,100 yuan/ton, up more than 400 yuan/ton from the beginning of the year.
The soaring price of upstream raw materials has led to a sharp rise in the production cost of steel mills, and steel companies have to choose to increase the price of steel to pass on the cost pressure. It is estimated that the current rise in the price of iron ore, coal coke and other raw materials has pushed up the cost of steel mills to produce a ton of steel about 1,000 yuan.
Rising demand is also an incentive
In addition to rising costs, the rising demand for steel is also an important incentive for soaring steel prices.
Since the beginning of this year, with the effective control of the domestic epidemic, traditional steel demand areas such as infrastructure and real estate have gradually picked up. On the other hand, steel demand in the automobile, home appliances, machinery and other manufacturing industries is also continuing to recover. Steel market demand shows an overall recovery trend.
However, in the case of the recent acceleration of production of steel enterprises, there is still a large gap between steel supply and demand, and the tight relationship between supply and demand is an important factor to promote the rise of this round of steel prices. Some experts expect that the gap between steel supply and demand this year will be as high as 50 million tons or so.
Steel enterprises stockpile goods, pressure to increase the supply of tight
On the other hand, in the context of the continuous rise in the price of raw materials such as iron ore, steel companies have placed large orders in advance to purchase raw materials and hoard raw material inventories in order to lower procurement costs. This “looting” behavior has also exacerbated the shortage of raw material supply.
At the same time, due to optimistic expectations of the future market, steel companies are often unwilling to deliver too much in the peak season, but choose to “press goods” for sale. This has undoubtedly exacerbated the gap on the steel supply side and increased the supply pressure on the end demand side.
Two measures may help to cool the temperature
In the face of the continuous surge in steel prices, the government and regulatory authorities have repeatedly shouted and severely interviewed them, but the actual containment effect is little. Recently, however, in order to curb the rapid rise in steel prices, the government has drawn up several drastic measures.
First, it will increase the punishment of steel enterprises’ hoarding and pressure on goods, severely crack down on illegal behaviors such as hoarding and price gouging, and standardize the production and operation behavior of steel enterprises.
Second, it will focus on increasing support for the merger and reorganization of steel enterprises, improve industry concentration by expanding the scale of advantageous steel enterprises, better avoid monopoly operations, disorderly competition and other chaos, and effectively maintain the smooth operation of steel market prices.
Experts pointed out that after the implementation of the above measures, it should be able to have a certain curbing effect on the current soaring steel prices. At the same time, as the rise in raw material prices slows down, the power of steel companies to raise steel prices may gradually weaken, and the overall steel price is expected to stabilize and fall in the next period of time.
The steel industry chain is in urgent need of adjustment and upgrading
In the long run, the current surge in steel prices also reflects the reality that China’s steel industry chain needs to be further adjusted and upgraded. For a long time, due to resource endowment and industrial base reasons, the development of China’s steel industry is very dependent on upstream raw material supply.
However, in recent years, with the depletion of resources and the tightening of environmental protection policies, the pressure on the supply of upstream raw materials has become more and more intense, which has increasingly become a bottleneck for the development of the steel industry.
In the future, if China’s steel enterprises want to achieve sustainable development, they must strive to break the constraints of resources, energy and other factors, continue to promote supply-side structural reform, and make breakthroughs in the fields of production capacity layout, product structure, and equipment technology. At the same time, the coordinated upgrading of the whole industrial chain is also the trend of The Times, and it is necessary to focus on the controllable risks of upstream raw material resources, but also to enhance the added value of midstream smelting and downstream terminal products.
Of course, industrial adjustment is good
There is a long way to go, and investors’ expectations of steel-related listed companies also need to be cautious. Since the beginning of this year, the share prices of some listed companies in the steel and coal fields have risen sharply. For how long this round of industry boom cycle can maintain, whether the fundamental pattern of the industry has changed significantly, in the long run, investors need to maintain rational judgment and response.
On the rising tide of the steel market, it is not difficult to find that the supply-side reform of the entire steel industry chain still needs to be accelerated, and a variety of factors such as rising raw material prices, recovering terminal demand, and stockpiling by enterprises
