Analysis and Forecast of Steel Prices Trend in January

In December, China's steel prices were in a recovery period after a sharp fall. In November, the price cliff fell and the risk of steel market was released. In the case of low social inventory and low demand season, the market was in a narrow range of volatility and consolidation. Then how will steel price be deduced in January 2019?

As of December 28, the total stock of major steel products in China was 8.877 million tons, a decrease of 249.4 million tons compared with the end of November, a decrease of 2.99%, an increase of 67.2 million tons over the same period last year, an increase of 0.84%. Among the five major steel products in China, the stock of construction steel increased, while the stock of hot and cold coils and medium and heavy plates continued to decline. Despite the decline in social inventory, the stock in steel mills has increased. Considering the weaker demand downstream in January, the overall stock in the market will still increase. Steel plant inventory will continue to increase in the state of decreasing orders. It can be said that the pressure of steel inventory in January is relatively high.

Judging from the production situation of steel mills, there was no large-scale overhaul of steel mills in December, and many Chinese steel enterprises carried out routine overhaul. Some steel enterprises in the north have limited production due to environmental protection, and the start-up rate of blast furnaces in China has been reduced for five consecutive weeks. With the increase of rain and snow cooling weather in China, the downstream purchasing demand is becoming more and more sluggish, and more steel enterprises arrange routine safety maintenance, so it is expected that the daily average production of crude steel in China will continue to decline next month.

In terms of raw material market, domestic mineral prices showed strong performance in December, with some major producing areas rising slightly, and the overall market turnover was general. Import mine prices showed strong performance in December. With the decrease of port stocks and the reverse increase, blast furnace start-up rate continued to decline, and prices continued to rise significantly under pressure. It is expected that the production cost of Chinese steel enterprises will be lower in January. Affected by the sharp decline of coke in the early period, the profit of coke coking enterprises in China shrank sharply. In December, the steady state of coke enterprises stopped falling. At the end of the year, coke prices began to fall for the fifth round, and there was still room for decline in the later period, owing to the backlog of inventory in coking enterprises, the slow pace of purchasing in downstream steel enterprises, and the calculation of profit and loss of fund recovery at the end of the year.

From the downstream demand point of view, the downstream demand entered the traditional off-season in January, the national low-temperature rain and snow weather increased, the overall demand of the market fell sharply, and the demand of the northern region fell to the freezing point. Most of the southern projects will also enter the end stage, the market demand will be sharply reduced, and the overall transaction will gradually shrink.

After the steelmaking price plunge in the early stage, the profit level of Chinese steelmakers has contracted sharply, and the awareness of steel enterprises to actively bid has increased; in the northern region, pollution weather is frequent, environmental protection and productivity limitation is strengthened, conventional overhaul of some superimposed steelmakers has continued to reduce the start-up rate of blast furnaces and supply pressure of steelmakers; the above points have formed a certain support for steel prices. However, there are also many factors that have negative effects on steel prices. Although the social inventory is at a low level, the latter stage of inventory is in a passive increase stage. With the increase of low temperature, rain and snow weather in the country, the demand for terminal procurement is shrinking day by day, and the incremental resources of Beibulu are under pressure. Generally speaking, steel prices are expected to stabilize after falling in January. With the approaching of the year, the significance of continued price fluctuations is not significant.