Recent steel price volatility will intensify

With the continuous deepening of the national energy conservation and emission reduction storm, the phenomenon of limited production in the steel industry has intensified. Following the shutdown of 18 steel mills in Wu'an, Hebei Province, another steel market, Tangshan, also issued a notice recently requesting 30 steel mills to limit production by nearly 50% in the next four months. Analysts believe that the suspension of electricity production will affect the short-term supply of steel, which will lead to special steel prices.

It is the rise in construction steel prices. However, some market participants pointed out that the a€?one size fits alla€? approach of simply relying on power cuts is not conducive to the long-term development of the steel industry, and may also increase the fluctuation of steel prices in the later period.

The production of steel in September was reduced by 10 million tons in September
First, the general power cuts in Jiangsu and Zhejiang provinces and the closure of some blast furnaces, followed by the suspension of some steel enterprises in Shanxi, followed by the restrictions on production in the steel provinces of Hebei Wu'an and Tangshan, the scope of production limits continued to expand.

Guojin Securities Research Report pointed out that only Tangshan City's power cut policy will affect 5.82% of national steel production in the next four months. If the documents of the Tangshan Municipal Government are fully implemented, Tangshan will reduce at least 46.53% of crude steel production (equivalent to 5.82% of crude steel production nationwide) and 40.73% of coke production in the next four months. Considering that the power cuts in Handan and Shanxi and East China are expected to affect the national steel output by more than 8%, "this is enough to make the supply and demand pattern of the national steel industry tight."

From a regional perspective, the current areas affected by steel curtailment are mainly concentrated in East China and North China: Jiangsu and Zhejiang in East China, Hebei and Shanxi in North China, and the above-mentioned provinces, cities and regions are also the production and sales of domestic private steel companies. Assembly point. Wang Na, an analyst with United Steel Network, said that the private manufacturers in the above-mentioned areas are mainly private building materials manufacturers, small and medium-sized steel manufacturers, strip steel and welded pipe manufacturers, medium and heavy plate manufacturers of billet rolling materials and small hot coil manufacturers.

Wang Na believes that from the perspective of specific steel products, the first impact is the highest proportion of hot-rolled narrow strip steel. According to the proportion, the most affected ones are small and medium-sized materials, bars, steel and wire. According to its calculations, in the case of 20% of production, the output of crude steel and steel in the four provinces and cities fell by 5 million tons and 5.5 million tons respectively in September.

Market: steel prices rose
Dealer sealed store reluctant to sell
According to data from Lange Steel, on September 6, steel prices in Beijing increased sharply, and the rebar market price rose by as much as 240-350 yuan/ton. The impact of the restricted production policy, the market price of steel prices will continue to rise for a period of time. Under the expectation of this rising market, many steel traders have also chosen to seal the warehouse or high-priced limited shipments.

Good: favorable profitability of tons of steel
For the steel market, which is in the stalemate of supply and demand, and is seeking a breakthrough direction, the introduction of the a€?restriction ordera€? will undoubtedly become the best excuse to raise the market price. On September 6th, the main contract of steel electronic disk and futures will rise sharply. Recently, the number of steel billets and threads in key cities in China has risen by 100~300 yuan/ton, with the highest range being close to 7%. However, due to the over-expansion, and the transaction is difficult to follow up strongly, both Tangshan billet and Shanghai hot-rolled stocks fluctuated yesterday. Hu Yanping, an analyst at China United Steel, said that this was mainly due to the strong market speculation atmosphere, which caused excessive inflation and caused fluctuations.

For steel companies, limiting production may increase profitability. Guojin Securities believes that this limited production will benefit the improvement of the profitability of tons of steel, and at the same time it will benefit the long-steel and special-steel listed steel enterprises. a€?Because the raw material production reduction is not as good as that of crude steel, this power restriction policy will increase the profitability of the steel. In the steel fine-molecular sector, the capacity of the non-listed steel enterprises in the long products and special steel industries is suppressed to a large extent, so it is correct. Long steel and special steel listed steel enterprises are more favorable."

Disadvantages: or retaliatory resumption of production
Some insiders believe that the biggest disadvantage of this limited production method is that it is not sustainable. a€?When the deadline for production is reached, all steel mills will resume production quickly, especially those that meet the industrial policy. On the contrary, there are hidden dangers that lead to retaliatory resumption of production.a€? Hu Yanping said that more market-based means such as finance and taxation should be used. Establish a long-term mechanism for energy conservation and emission reduction with a small amount of administrative means.

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