Price trend

This week, hot rolled sheet and coil prices increased slightly. According to SunSirs' commodity market analysis system, as of December 19th, the average price of hot rolled sheets and coils in the domestic market was 3,320 RMB/ton, a week-on-week decrease of 0.598%; the average price of cold rolled sheets in the domestic market was 3,902.5 RMB/ton, a week-on-week decrease of 0.951%.

Factors affecting price changes:

Fundamentals

According to the latest data obtained by SunSirs, this week's hot rolled steel social inventory was 307.3 tons, a week-on-week decrease of 57,600 tons, and weekly production was 2.9191 million tons, a week-on-week decrease of 168,000 tons; this week's cold rolled steel social inventory was 1.2904 million tons, a week-on-week decrease of 12,200 tons, and weekly production was 855,200 tons, a week-on-week increase of 7,600 tons.

This week, the inventory of steel billets at major warehouses and ports in Tangshan totaled 1.2508 million tons, an increase of 30,300 tons compared to the previous week.

This week, the supply of the five major steel product categories totaled 7.9797 million tons, a decrease of 82,500 tons (1%) compared to the previous week; total inventory was 12.9478 million tons, a decrease of 373,100 tons (2.8%) compared to the previous week; and consumption was 8.3528 million tons, a decrease of 0.5%. Specifically, consumption of construction materials increased by 2.4% week-on-week, while consumption of plate steel decreased by 2%.

Cost side

On the supply side, the supply of the five major steel products this week was 797.97 tons, a decrease of 82,500 tons week-on-week, a decrease of 1%. This week, the production of the five major steel products, except for rebar and medium plates, decreased week-on-week. The core driving factors are that seasonal maintenance is underway, and some steel mills are shifting their molten iron production, leading to increased production of individual varieties. In terms of inventory, the total inventory of the five major steel products this week was 12.9478 million tons, a decrease of 373,100 tons week-on-week, a decrease of 2.8%. This week, the total inventory of the five major varieties decreased week-on-week: factory inventory decreased week-on-week, with the decrease mainly contributed by rebar. Social inventory also decreased week-on-week, with the decrease also mainly contributed by rebar. In terms of consumption, the weekly consumption of the five major varieties this week was 8.3528 million tons, a decrease of 0.5%; among them, the consumption of construction materials increased by 2.4% week-on-week, and the consumption of plate materials decreased by 2% week-on-week. This week, the apparent consumption of the five major varieties showed an increase in construction materials and a decrease in plate materials.

According to Mysteel's hot rolled steel balance sheet calculations, domestic consumption and apparent demand in January are expected to undergo a period of moderation after the release of risks, following a pattern of initial decline followed by stabilization and recovery. The reasons for this weak bottoming out and subsequent stabilization are primarily: 1. Weak consumption expectations in January will lead to an initial release of risk in the market, followed by a slight accumulation; 2. Current overseas consumption is declining, leading to expected decreases in both direct and indirect exports, resulting in a "price-for-volume" structure and a decline in external demand; 3. After domestic consumption bottoms out, relatively low prices and low risk will trigger some speculative consumption. Therefore, overall, the price trend is expected to be initially low and then stabilize, with the overall price level slightly shifting downwards.

Market Outlook:

The seasonal characteristic of year-on-year demand decline is difficult to reverse. Fundamentally, both production and inventory are decreasing, and many steel mills have maintenance plans scheduled for the end of the year, so the weak supply-demand balance will not be broken for the time being. In the short term, the increasing expectation of a Fed interest rate cut and the approaching important domestic meetings provide dual support from a macroeconomic perspective, leading to a rebound in prices and a gradual strengthening of the upward trend in the steel market. It is expected that national hot rolled sheet and coil prices will fluctuate upwards next week.

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