2024 Second Half of the Year Steel Price or First Suppression and Then Rise
Jul 12, 2024
Throughout the year, with the continuous downturn in smelting profits, the elasticity of profits has significantly narrowed, shifting the main factors affecting steel price fluctuations towards raw materials. In the first half of 2024, the profit from steel raw materials was given back, providing insufficient support for steel prices. By the end of June, the main raw materials had fallen by more than 20% compared to the beginning of the year, while the decline in steel varieties was relatively smaller, with the cold rolling price falling by 12.9%, the largest drop, and the galvanized price falling by the smallest, 6.3%.
Looking forward to the second half of the year, steel prices may first be suppressed and then rise. 1) Raw material prices in the third quarter are still under pressure, dragging down steel prices. 2) In the fourth quarter, the signal of industrial restocking will be enhanced, and raw materials may enter the restocking cycle first, supporting the steel price rebound. It is expected that the average price of the general steel absolute price index in the second half of 2024 will be around 3940 yuan/ton, a year-on-year decrease of 4.2%.
(1) In-depth adjustment in the real estate market, infrastructure performance below expectations
The real estate market has undergone in-depth adjustments in the first half of the year, with significant declines in various indicators. From January to May, the year-on-year growth rate of major real estate indicators showed a double-digit decline. Especially the year-on-year growth rate of the completion area has turned from 17% in 2023 to -20.1% in the first five months of this year, indicating an unprecedentedly severe situation in the real estate market. According to research feedback, financial tension is still the main reason for the real estate problem. Although real estate policies have been gradually relaxed this year, the market warming signal is still not obvious. The in-depth adjustment of the real estate market has led to a significant decline in steel consumption, especially the shrinkage of construction steel consumption is more obvious.
(1) Profits of the steel industry from January to May created the lowest record in the same period of history, and the continuous shrinkage of consumption is the main reason.
From January to May, the steel industry lost more than 10 billion yuan, with more than 60% of enterprises suffering losses. According to data from the National Bureau of Statistics, the total profit of the black metal smelting and processing industry from January to May 2024 was -12.7 billion yuan, the worst period in history. The average profit margin of 247 steel enterprises from January to June was 37%, which is about 4 percentage points lower than in 2023, and the steel enterprise loss is large.
In the first half of 2024, both steel prices and raw material prices were weak, with raw materials falling more than steel. Coke and coal led the decline, with coking coal falling by 23.9% from the beginning of the year, coke by 21.7%, and iron ore by 21.9%. Among the steel varieties, the cold rolling price fell the most, by 12.9%, followed by rebar, with a price drop of 11.1%, and the galvanized price fell the least, by 6.3%.
1. Raw materials are expected to accumulate inventory in the third quarter, continuing to drag down finished products.
2. In the fourth quarter, the intensity of industrial restocking will be enhanced, raw materials will restock first, and support the steel price rebound.
1. Under the action of energy-saving and carbon reduction, the administrative pressure production in 2024 may exceed expectations.
2. Customs tax checks or restrictions on the export of some low-priced steel may occur.
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