Steel market demand insufficient peak season not flourishing steel production has declined

The purchasing managers' index (PMI) for the steel industry, as surveyed by the Council, came in at 43.9% in September, down 3.1 percentage points from August.Sub-index shows that the market demand is less than expected, steel production has decreased accordingly, the price increase of raw materials has slowed down significantly, the steel market as a whole is not flourishing in the peak season pattern.However, enterprises for the future market expectations are still looking forward to the enterprise raw material procurement and inventory steadily increased.Expected in October, market demand still has room to rise, steel production picked up in the short term, but the fourth quarter of total output may drop month-on-month.

The overall market demand is insufficient

In September, the steel market demand showed "internal and external differentiation, overall insufficient" situation.Domestic steel market demand start limited, lower than the market expectations, in the traditional September peak season, steel mills received orders did not rise but fell, new orders index is 36.6%, down 9 percentage points month on month, four consecutive months at less than 50%, and hit the new low since February.Foreign countries have made progress in restarting their economies during the epidemic. International steel demand is picking up, and export orders are picking up.The index of new export orders was 46.6%, up 11.9 percentage points from August.

At the end of the market, the mood was slightly pessimistic.It is understood that the current domestic steel market terminal demand performance is general, although the construction steel market has gotten rid of the influence of high temperature and rain, but did not enter the peak season as scheduled;The sheet market, weighed down by the construction steel market, also underperformed as the supply side eased.According to the monitored purchasing data of terminal wire coils in Shanghai Stock Market, the average daily purchasing volume of terminals in September increased by 5.6% month-on-month, with a limited increase.

Production in steel mills has tightened up

In September, due to insufficient market demand and the high cost of raw materials before, the production power of steel enterprises was insufficient. The production index was 46%, down 3.3 percentage points from August, three consecutive months of decline, and continued to run below 50% after August, indicating that the current production of steel mills has declined somewhat.According to the estimation of Steel Association, in September, the accumulated average daily output of crude steel of key steel enterprises in China was 2.136,600 tons, down by 0.55% month-on-month and up by 6.73% year-on-year.Pig iron was 1.8962 million tons, down 1.08 percent month-on-month and up 4.82 percent year-on-year.Steel is 199.93 million tons, down 4.35% month-on-month and up 6.5% year-over-year.

Despite a slow September season and a drop in production, businesses are still looking forward to October.Business purchasing of raw materials and inventory activity picked up. The purchasing volume index stood at 43.1 percent, up 0.6 percentage points from August.The raw materials inventory index stood at 40.9 per cent, up 5.7 percentage points from August.

Product inventory levels are down

In September, although the market demand is not optimistic, but due to the steel mill output contraction, steel mill shipments are still relatively smooth, coupled with the Mid-Autumn festival, National Day "double section" before replenishment of the demand increase, steel mill inventory tends to decline.In September, the finished goods inventory index was 36.8 percent, down 0.4 percentage points from the previous month.According to the enterprise feedback, the current sales are relatively stable, steel mill inventory pressure is small.

Social inventories are also high and falling.According to the statistics of Steel Association, in the middle of September, the social inventory of five varieties of steel in 20 cities was 12.42 million tons, 10 thousand tons less than the previous ten days, a decrease of 0.1%.That was down 7.79 million tons, or 38.5%, from the peak in early March.In terms of varieties, the rebar inventory is 6.5 million tons, 90,000 tons less than the previous decade.Wire rod inventory is 1.95 million tons, 20 thousand tons less than the previous decade;Hot rolled coil stock is 1.88 million tons, an increase of 20,000 tons over the previous decade;Cold-rolled coil stock is 1.13 million tons, an increase of 10,000 tons over the previous decade;The inventory of medium thick plate is 960,000 tons, an increase of 70,000 tons over the previous decade.

Steel prices continue to fall

In September, due to the market demand less than expected, the market mood is relatively pessimistic, in the month steel prices showed a downward trend.Data from relevant institutions showed that on September 1, Shanghai rebar index was 3,727 yuan/ton;On September 3, it briefly rose to the monthly high of RMB 3,751 / ton and then continued to decline.On September 27, Shanghai rebar index was 3,633 yuan/ton, down 94 yuan/ton from the beginning of the month.From January to September Shanghai steel rebar index trend, the current steel prices are still at a higher level since the beginning of the year, conducive to the realization of benefits of steel mills.

Market demand still has room to rise

In the third quarter, due to the impact of the epidemic, the overall market demand is flat.At present, the impact of the epidemic in China is basically under control, the economy is in the stage of rapid recovery, and the economic order is basically normal. It is estimated that the steel market demand in the fourth quarter is somewhat uncertain, but there is still room for growth.

On the one hand, the construction industry, machinery, automobile and other manufacturing industries recovered well, steel demand continued to release.Auto sales have been growing at more than 10% for four consecutive months, and the auto market has continued to strengthen.Infrastructure is also expected to perform well in October, so the pace of destocking of construction steel accelerated at the end of September.

On the other hand, there is uncertainty in the real estate market.At present, although the domestic real estate market continues to pick up, the recent tightening of local real estate regulatory policies and the risks of some real estate companies have weakened the confidence of the market in the future real estate market.For the steel market, it will obviously reduce the performance of the demand side of the market expectations.But overall, demand in the fourth quarter is still dominated by rising.

In the fourth quarter, the production of steel mills may fall from the previous quarter

In September, the market expectations of the peak season did not occur, steel mill production has been tightened.In October, there is still room for market demand to rise, and companies are also looking forward to this. In October, demand is expected to lead to a short-term increase in production.But after entering November, by the heating season production limit and with the steel side shutdown, the steel city supply and demand at both ends will be synchronous tight.From the local heating season has been introduced to limit production policy, this year will be more stringent than the past two years.In addition, the current steel mills and social inventory is still at a high level, huge inventory on the production of extrusion effect.The price of raw materials is also at a relatively high level, bringing pressure to the production of enterprises.It is expected that in the fourth quarter, after a short rise in steel production tends to decline, quarterly production may fall, but still year-on-year growth.Annual crude steel output is expected to exceed 1 billion tons.

In general, in September, the market demand was less than expected, the production of steel mills fell accordingly, leading to a continuous decline in steel prices, and the growth rate of raw material prices slowed down. On the whole, the steel market is not flourishing in the peak season, but the enterprises are still looking forward to October.In October, market demand is expected to be uncertain, but there is still room to rise, steel production will rise in the short term, but the fourth quarter of total output may decline month-on-month.