What are the reasons for the recent drop in steel prices

Since November, China's domestic steel market still shows a weak trend of supply and demand, and the market has continued its weak operation since October. What are the reasons for the recent drop in steel prices?

First, compared with the decline in output, the trend of weakening demand is more obvious. At present, the reduction in crude steel production, the prevention of air pollution in autumn and winter, and the start of peak-shift production during the heating season have greatly restricted the release of steel production. Both the operating rate of blast furnaces and the output of steel enterprises have shown a significant downward trend; but on the demand side, with the decline in temperature, especially the recent cold wave across the country, has significantly weakened the demand for building materials; while the downstream manufacturing industry's prosperity has further declined, and the output of steel products has increased year-on-year, which has also weakened the demand for sheet materials.

Second, with the weakening of demand and the decrease in market transactions, the decline in steel stocks in society has slowed down.

The third is that the coke market has entered an up-and-down channel, the price of iron ore has fallen further, and the spot cost of steel has fallen as expected.

At present, the demand for iron ore and coke will continue to weaken under the constraints of steel production restrictions. The shrinking profit margin of steel mills and the intensified game on the raw material end will further drive the price of raw materials downward, and the role of cost support will continue to weaken. However, the demand side of steel will still be weak and the transaction will hardly pick up. There may be an oversold rebound in the short-term market. However, it is expected that the steel market will find it difficult to get rid of the bottom-seeking situation in November.