Baosteel Group's Factory Prices Mostly Down in August Amid Downstream Order Deviation and Increased Competitive Pressure
Jul 12, 2024
According to My Steel Network, in August, the ex-factory prices of Baosteel Group have largely been reduced based on the prices in July. This price adjustment is mainly to cope with the domestic off-season consumption, and the pressure to order has increased. Especially for some core varieties, the impact is relatively large, making it difficult for prices to show a rebound pattern.
The entire series of hot-rolled products are under high pressure. The core issue is still that the profit from black goods is still stronger for sheet products than for long products. Therefore, the consumption pressure on hot-rolled, cold-rolled, and galvanized products rises during the off-season, forming a situation where supply does not decrease, demand declines, profits are positive, and supply and demand are loose.
For August, the hot-rolled Q235B tax-inclusive base price is 5302.85 yuan/ton; cold-rolled DC01 tax-inclusive base price is 8154.29 yuan/ton; hot galvanized DC51D+Z tax-inclusive base price is 8934.73 yuan/ton; silicon steel is 6038.6 yuan/ton (the above are estimated prices, the actual prices are subject to the price list).
Baosteel Group's orders in August are under greater pressure compared to July. In addition to domestic trade pressure, the decline in overseas prices has led to an increase in export order pressure. Downstream orders are not abundant, and currently, they are only replenishing inventory without hoarding and speculative behavior. This is the core issue of the lack of global liquidity, which makes it difficult for demand to rebound.
Looking at the next month, whether the price will remain stable depends on more factors, and we will also make a rough analysis:
The Federal Reserve's interest rate cuts have not decreased, which has suppressed liquidity overseas, especially in countries with a shortage of foreign exchange, causing a suppression of purchasing power. From the current U.S. data, the core PCE continues to operate at a high level, and the core inflation has not decreased. Employment is relatively poor, making the probability of short-term interest rate cuts still maintained, but it is difficult to land. The difficulty of interest rate cuts before September continues to be maintained, making global liquidity continue to be compressed, making it difficult to release overseas purchasing power, and export pressure still exists.
Entering the off-season consumption of the manufacturing industry in July, the Mysteel survey shows that the manufacturing industry's inventory still needs a longer time to be digested, so it is difficult for domestic consumption to rebound in the short term, which is still low for downstream procurement enthusiasm. Looking at the PMI structure, the order on hand is low, and it is difficult for new orders to increase, and the support strength of rigid demand is poor without obvious policy introduction. For domestic consumption in August, the variable is not large, and exports are still in a supporting situation, making it difficult to appear rapidly.
In July, the steel mill maintenance volume was flat compared to June. Currently, the maintenance expectation in July has been postponed, and the increase in new production lines has also increased. In addition, the profit of deformed steel bars is negative, and the profit of hot-rolled coils is positive, which also makes the output bias more clear. At present, the point-to-point profit of the steel mill is maintained at 40-50 yuan/ton, although it has been greatly compressed, but it can still maintain production, and the short-term reduction expectation will appear. Therefore, the output is maintained at a high level, and the consumption off-season pressure appears, and the supply and demand contradiction in July is still large, and the contradiction in August may continue to accumulate, which is difficult to support the confidence of the downstream.
Overall, the base price of Baosteel Group in August has been reduced, and the main core contradiction comes from the domestic consumption off-season and the gradual pressure of overseas exports. Secondly, the output is maintained at a high level, causing inventory to accumulate. At present, the supply and demand contradiction is under seasonal pressure, and corporate procurement is cautious, with low orders on hand, and the supply is strong and weak pattern is reflected.
Based on this reason, it is difficult for the factory price of the steel mill in September to rise until the supply and demand are balanced, and the inventory shows a de-stocking structure.
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