Steel companies cut production demand

The recent low iron ore prices rebounded, resulting in lower production enthusiasm for China's major iron and steel enterprises, while the output of crude steel fell month-on-month. However, the seasonal off-season made the downstream shipments of the steel market weak, and steel prices will continue to be under pressure.

According to the latest statistics from the China Iron and Steel Association (hereinafter referred to as China Steel Association), in mid-July, the daily output of crude steel of key enterprises was 1.808 million tons, a decrease of 0.68 million tons, which was a decrease of 0.37% from the previous month. At the same time, the data also showed that in the middle of July, the stock of major key steel companies at the end of the current calendar year was 14.708 million tons, an increase of 334,900 tons compared with the previous ten-year period, an increase of 2.31% compared with the previous period.

The increase in iron ore prices and the drop in steel prices and the apparent lack of demand for steel products are the main factors causing the decline in average daily production of crude steel, analysts said.

The price of iron ore rebounded in the second half of June. According to statistics, the 62% iron ore index of Platts began to rebound after falling to the lowest of US$89/ton during the year on June 16. As of July 25, the average price of Platts' 62% iron ore index in July was US$95.78/ton, which was US$3.11/ton higher than the average price in June. Although with the rise in iron ore prices, steel production costs have gradually increased, but China's steel prices have failed to follow up. The comprehensive price index for domestic steel products issued by the China Iron and Steel Association (hereinafter referred to as the index) shows that the index fell by -1.19% from the end of June at the end of July. The average price of rebars in major cities across the country monitored by related agencies also showed that the average price of HRB400 material Φ20MM rebar on July 29 fell by RMB 24/t from June 30, which was close to 0.76%.

Although steel prices have been low, the demand for steel is unlikely to increase significantly. Wang Jinsheng, vice president of the Tianjin Metal Materials Industry Chamber of Commerce (Association), said that the seasonal off-season made the downstream shipments of the steel market weak, and the overall transaction atmosphere was deserted. Traders have also basically given up on the "rising stocks gambling" business model due to financial constraints and continued to fast-forward and fast-out operations, according to industry insiders.

According to the data released by the China Iron and Steel Association (STA), the major iron and steel enterprise bank data shows that after the company's inventory fell below 15 million tons, the destocking operation was significantly hindered, and it has been operating in the 14 million tons-15 million tons interval for three months. At the same time, the inventory statistics of the major steel products (building steel, hot rolled coil, cold rolled coil, and medium plate) provided by the relevant agencies showed that after the inventory total fell below 14 million tons, the destocking rate was obvious. Slowdown, including a decrease of 2.5 million tons of inventories in May, a reduction of 800,000 tons in June and a 400,000 tons decrease in July. The lackluster performance of de-stocking shows that not only has the function of “reservoir” of steel traders significantly weakened, but also the demand of downstream end-users has not been significantly increased.

At present, the iron ore market is fiercely competitive. In particular, the competition between the giants of the mining industry has become increasingly intense. The industry believes that even if there is a wave of supply in the global iron ore market, even if there is a wave of rebound in domestic ore prices, it will be a phased phenomenon. ,Short-term. At the same time, the recent high temperature and rainy season factors are unfavorable to the construction of the project, and the overall steel market demand is weak, and the supply pressure is not reduced. From the perspective of cost support and demand driving, the steel price will be suppressed in the near future.