Judging from the steel industry PMI surveyed and released by the China Federation of Iron and Steel Logistics Professional Committee, it will be 46% in January 2024, the same as the previous month. The changes in the sub-index show that the off-season effect of the steel industry continues to appear, the overall decline in steel market demand, the tightening of steel production, the accumulation of steel mill inventories, the slowdown in the upward momentum of raw materials, and the slight decline in steel. It is expected that in February, the demand side will continue to contract, the production of steel mills will decline further, raw materials will fall again, and steel will be slightly larger.
Figure 1 Changes in the PMI of the steel industry since 2019.
The overall demand for steel market has declined, and exports have stabilized to a certain extent. January is the traditional off-season for the steel industry, due to the low temperature in most areas, coupled with the approach of the Spring Festival, the overall downstream construction has entered the final stage, steel traders have basically entered the winter break, and the overall demand for steel has declined. The new orders index was 438%, although it increased by 08 percentage points, still at a low level below 45% for two consecutive months. According to Shanghai Zhuogang Chain, with the drop in temperature and the reduction of downstream construction, the market transaction volume has shrunk. In terms of terminal procurement, according to the monitored terminal snail procurement data in Shanghai, the terminal procurement volume in Shanghai fell by 14% month-on-month in January, and the transaction volume shrank. In terms of exports, there was some stabilization, and the new export orders index was 511%, up 2 percent from the previous month4 percentage points, up for 2 consecutive months.
Figure 2 Changes in the steel new orders index since 2019.
Figure 3 Changes in the monitoring data of the weekly purchase volume of terminal snails in Shanghai since 2018
The production of steel mills has tightened, and steel inventories tend to accumulate. In January, due to the weakening of the steel market demand, the heating season production limit has been strict, and the approach of the Spring Festival has a certain impact on the production willingness of enterprises, in this case, the production of steel mills has been tightened. The production index was 437%, down 21 percentage point, down for 2 consecutive months. According to the survey of Shanghai Zhuogang Chain, a large number of steel enterprises and steel traders are currently in a state of long vacation. The speed of accumulation of enterprises has accelerated, and the inventory index of finished products is 437%, up 08 percentage points, rising month-on-month for two consecutive months, and the index was the highest in nearly nine months. According to the statistics of the China Iron and Steel Association, the inventory of key steel enterprises in early January was 1439450,000 tons, rising to 1,535 in the middle of the year450,000 tons.
Figure 4 Changes in the steel production index since 2019.
The upward momentum of raw materials** has slowed down, and the cost pressure of steel mills has been reduced. In January, due to the tightening of supply and demand, the purchase of raw materials contracted accordingly, and the support for raw materials also weakened. The Purchase** index was 578%, down 187 percentage points, indicating that the upward momentum of raw materials** has slowed down. In terms of categories, iron ore continues to be overestimated, although the momentum has been curbed in the month, but the current ** has been at a high level. Since January, the supply and demand of coal have gradually returned to normal, and coke ** has also declined. Scrap fluctuated slightly. On the whole, the main raw materials of the steel industry declined to a certain extent in January, and the cost pressure of steel mills was reduced.
Figure 5 Changes in the steel purchase** index since 2019.
Steel is under pressure, and the overall situation is downward. In January, due to the tightening of steel traders' orders and terminal procurement, steel ** was also under pressure. According to the Shanghai rebar index, it was 3,958 yuan tons on January 3, the highest point in the month, and then fell to the lowest point of 3,842 yuan tons on January 18 under the influence of declining demand. In the second half of the year, due to the macroeconomic policy stimulus, the steel market is expected to become better after the year, and there is a certain rebound, rising to 3904 yuan tons on January 26. On the whole, steel showed a downward trend in January.
Figure 6 Changes in the Shanghai rebar** index since 2018.
ExpectedIn the month, the supply and demand of the steel market will continue to contract. Before and after the Spring Festival holiday, the demand for steel by enterprises will continue to decrease, and steel traders will gradually leave the market seasonally, and the construction site will generally start after the Lantern Festival, so the basic steel demand in February is close to stagnation. The accumulation of steel mills will rise again, and winter storage will continue to advance. In terms of production, the blast furnace overhaul in the early stage will also be restarted after the holiday, and on the whole, both supply and demand have contracted in February.
Raw materials fell again, and steel was slightly lower. After entering February, the demand for raw materials may decrease again, and the lack of fundamental support for iron ore ** is expected to fall at a high level. The steel transaction will also be almost stagnant due to the Spring Festival, in the case of a sharp decline in trading volume, steel **slightly**.
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