Price trend

Hot rolled sheet and coil prices fell before rising this week. According to the SunSirs commodity market analysis system, as of September 19, the average domestic hot rolled sheet and coil market price was 3,446.67 RMB/ton, a 1.58% week-on-week increase; the average domestic cold- rolled sheet market price was 4,032.5 RMB/ton, a 6.11% week-on-week increase.

Factors influencing price fluctuations:

Fundamentals 

According to the latest data obtained by SunSirs, the social inventory of hot rolled steel this week is 296.69 tons, up 43,300 tons from the previous week, and the weekly output is 3.2649 million tons, up 13,500 tons from the previous week; the social inventory of cold rolled steel this week is 1.3923 million tons, up 26,800 tons from the previous week, and the weekly output is 846,000 tons, down 16,900 tons from the previous week.

This week, the inventory of same-caliber steel billets in Tangshan's major warehouses and ports reaches 1.2609 million tons, a decrease of 103,100 tons from the previous week. This week, the daily billet sales volume of 22 sample companies in Tangshan and its surrounding areas is approximately 37,000 tons, an increase of 2,000 tons from the previous week.

Cost side

On the supply side, supply of the five major steel varieties reaches 8.5546 million tons this week, a decrease of 17,800 tons (0.2%) from the previous week. Steel production declined this period, primarily driven by a significant drop in rebar production. Total inventories of the five major steel varieties reaches 15.1974 million tons, a 0.3% increase (51,300 tons) from the previous week. Total inventories of the five major varieties increases this week, with divergent trends in building material plate inventories, with building materials experiencing destocking and plate accumulation. Consumption of the five major varieties reaches 8.5033 million tons, with building material consumption increasing by 4.3% from the previous week and plate consumption decreasing by 0.9%. Consumption of building materials and plate also diverges within the five major varieties this week.

According to Mysteel statistics, for building materials, taking rebar as an example, across the three major regions, the southern region shows an accumulation of inventory, while the rest of the regions see a decrease in inventory, with weekly decreases of 19,600 tons and 3,100 tons, respectively. Across the seven major regions, destocking is most pronounced in East China, with a decrease of 19,600 tons. Regarding hot rolled coil, across the three major regions, the northern region shows a decrease in inventory, while the rest of the regions see an accumulation of inventory. The accumulation is most pronounced in the southern region, with a weekly increase of 56,500 tons. Across the seven major regions, the accumulation is most pronounced in South China, with an accumulation of 40,000 tons.

Market outlook

On the supply side, there's limited room for further significant declines in rebar production, and short-term production may remain at its current low level. Hot rolled coil production may also maintain its current level with a slight decline.

On the demand side, a significant rebound in apparent consumption of rebar and hot rolled coil is insufficient to drive this. Steel demand remains at seasonal, rigid demand levels, with a slow recovery. Regarding hot-rolled coil, Mysteel's research also shows that downstream industries have gradually initiated procurement plans, and steel mills currently have orders on hand that can last for approximately 15 days. Rigid demand continues to support hot rolled coil consumption.

On the inventory side, steel inventories are diverging. With rebar production remaining at a low level, there's little pressure to destock rebar. However, with hot rolled coil production remaining high, it's difficult to maintain a rapid destocking pace. However, with rigid demand for replenishment before the National Day holiday, there's still momentum for inventory reduction.

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