External Shock Strikes Again, The Steel Market Is Weak And Fluctuates Down

The price changes of 17 categories and 43 specifications (varieties) of steel raw materials and steel products in some parts of the country in the 44th week of 2022 are as follows: In contrast, rising varieties have decreased, flat varieties have decreased, and declining varieties have significantly increased. Among them, no varieties rose, 5 fewer than the previous week; 3 varieties remained unchanged, 5 fewer than the previous week; and 40 varieties fell, 10 more than the previous week. The domestic steel market has been steadily declining. Iron ore prices fell by 30-45 yuan, coke prices remained stable, scrap steel prices fell by 60-110 yuan, and billet prices fell by 100 yuan.

Because inflationary pressures in various countries around the world remain relatively high, news of central banks raising interest rates one after the other, with the European Central Bank raising rates by 75 basis points. The expectation that the economy will enter a recession has increased, and the Chinese economy is still confronted with numerous challenges, including a more complex and severe international environment, frequent epidemics, and a relatively weak steel market demand recovery. The State Council held another executive meeting on October 26. Consumption policy has been accelerated and made more effective. First, fiscal and financial policy tools should be used to support the construction of major projects and the renovation of equipment, and more physical workloads should be formed in the fourth quarter; accelerate project construction to ensure project quality; encourage private investment in major projects; and accelerate equipment renovation. Loans for renewal and renovation will be supported equally for the purchase of domestic and foreign equipment in order to expand manufacturing demand and guide expectations. The second is to promote the recovery of consumption as the main driving force of the economy, to expand the use of food for work to promote employment, increase income, and bring consumption, and to include the renovation of consumer equipment in the scope of re-lending and financial discount support; and to support rigid and improved housing needs through city-specific policies. Warmer demand is still expected in the domestic steel market, but due to the influence of weather factors, the time for effective construction will gradually decrease, and the demand for rush work may be released.

From the supply side, as steel mills have resumed losses, some steel mills have begun to increase the intensity of maintenance and production reduction, and the supply side will continue to decline in the short term. The expectation of warmer demand remains, but the lack of steel market transactions limits the expected landing, and the northern steel market may also release the need for rush work, but with the gradual transition to the off-peak season, weather factors will significantly affect the release of demand. From a cost standpoint, as steel mills began to increase the intensity of maintenance and production reduction, raw material prices began to fall under pressure, causing the cost support to deteriorate once more. In the short term, the domestic steel market will face a steady decline in short-term supply, the possibility of rushing to work, and a reversal of cost support. The domestic steel market will exhibit a pattern of weak shocks falling next week (2022.10.31-11.4).