In the short term, raw materials for the steel industry are showing strength, indicating that prices are unlikely to fall. The support for steel prices is also expected to remain strong. However, some challenges may arise in the coming months.
Concerns have been raised as Yunnan, Tangshan, and other regions in China have issued notices of production reduction or restrictions after the holidays. This, combined with the “Work Plan for Stable Growth of the Industry” jointly issued by the Ministry of Industry and Information Technology and other authorities, which emphasizes the need to strictly implement capacity replacement requirements, could constrain steel output.
A significant decline in output would lead to a reduction in raw material demand and downward pressure on prices. This could have a negative feedback effect on the prices of finished steel products. However, if the decline in output is not substantial and molten iron output remains high, raw material prices are likely to maintain their strength and provide support for finished product prices.
Despite these challenges, positive factors are accumulating in the steel market, hinting at a potential improvement in the future. The acceleration of special bond issuances and the resumption of special refinancing bond issuances will stimulate effective investments and boost physical workload. Manufacturing demand is also picking up, as indicated by the rebound of the manufacturing Purchasing Managers’ Index (PMI) in September. Key indices such as production, new orders, and purchase volume have shown month-on-month increases, which will contribute to an increase in overall demand.
However, the real estate sector continues to be a drag on steel demand, limiting the potential for significant short-term improvement. This suggests that while there is some room for demand recovery in the later period, the overall increase in demand is expected to be relatively limited and substantial growth is unlikely.
On the supply side, the article highlights the issues surrounding steel production. The government’s push for capacity reduction, as outlined in the “Work Plan for Stable Growth of the Industry,” is expected to have an impact on output. The measures implemented by Yunnan, Tangshan, and other regions to reduce production or issue production restrictions also reflect the pressure steel mills are facing.
In conclusion, while the short-term outlook for steel prices remains strong due to the resilience of raw materials, challenges lie ahead. The reduction in output and potential decline in demand could impact raw material prices and, consequently, the prices of finished steel products. However, positive factors such as increased investment and improving manufacturing demand provide a glimmer of hope for the steel industry’s future.
Post time: Oct-19-2023