According to the latest report issued by the Iron and Steel Logistics Professional Committee of China IOT, the PMI index of the domestic steel industry in December 2020 was 45.8%, a decrease of 3.4 percentage points from the previous month, and the operation of the steel industry has declined.
The sub-indices show that domestic steel demand is becoming cautious, steel mill production has been tightened accordingly, the growth rate of raw material purchases has slowed, raw material prices and steel prices have risen in conjunction . It is expected that in January 2021, both ends of the market supply and demand will continue to operate tightly, raw material prices may fall to a certain extent, and steel prices will fluctuate slightly.
The report shows that in December 2020, as the weather gradually turns colder, the overall demand will naturally decline as the winter deepens. The price of steel increased significantly during the month, further stimulating the tightening of steel market demand. Taken together, the current domestic steel market demand is cautious, with a new order index of 42.0%, a decrease of 5.2 percentage points from the previous month. Although the spread of the epidemic in major foreign economies continues to accelerate, their economies are still recovering. The manufacturing industry has increased and automobile sales have increased, which has driven the demand for related steel products. my country’s steel exports have risen rapidly in the short term. The new export order index was 54.4%, an increase of 8.5% from the previous month.
According to the report, as market demand has become more cautious, environmental protection shutdown policies have increased, and domestic steel mills have tightened their production. The production index was 47.7%, down 5.6 percentage points from the previous month. According to estimates from the China Iron and Steel Association, the cumulative average daily crude steel production in December decreased by 0.43% month-on-month; pig iron decreased by 0.01% month-on-month; steel products decreased by 1.15% month-on-month.
As the production of steel mills declines, the procurement of raw materials and the number of employees have also tightened. The procurement volume index was 45.9%, a decrease of 1.8 percentage points from the previous month, and the number of employees was 49.0%, a decrease of 1.5 percentage points from the previous month. The inventory of raw materials has also declined. The raw material inventory index was 32.1%, a decrease of 5.9 percentage points from the previous month.
Affected by this, the speed of domestic steel mills to depot has slowed down slightly. The finished product inventory index was 33.5%, an increase of 1.3 percentage points from the previous month. According to statistics from the China Iron and Steel Association, in mid-December, the inventory of key steel enterprises was 13.0505 million tons, an increase of 370,800 tons or 2.92% from the previous month.
Raw material costs continue to rise
It is worth noting that in December 2020, raw material prices The pressure on the cost of raw materials for the factory continues to increase. Purchase priceThe grid index was 72.1%, a sharp increase of 2.4 percentage points from the previous month, the highest in the past four years. Regarding iron ore, due to increased supply uncertainty in major exporting countries and capital speculation, prices have risen relatively quickly in the short term. On December 21, 2020, the general 62% iron ore index was US$176.9/ton, a record high in the past seven years, and then fell slightly. On the 28th of that month, the general 62% iron ore index was US$164.25/ton, still an increase of US$46.3/ton from the end of the previous month.
In terms of other raw materials, the price of plain carbon billet in Hebei is RMB 3770/ton, up by RMB 150/ton from the end of last month; the price of scrap steel in Shandong is RMB 2,600/ton , An increase of 160 yuan/ton from the end of the previous month; the price of secondary coke in Shanxi was 2290 yuan/ton, an increase of 250 yuan/ton from the end of the previous month; the price of 65-66 grade acidic dry-based iron concentrate in Jiangsu was 1330 yuan/ton, compared with An increase of 240 yuan/ton at the end of last month. The prices of raw materials in steel mills rose across the board.
Regarding the market outlook, the report forecasts that in 2021, under the policy guarantee of proactive fiscal policies and maintaining moderate spending intensity, new infrastructure will be strengthened. The equipment manufacturing, automobile, machinery and other industries in the manufacturing industry have maintained good growth, which will form a strong support for steel demand. On the whole, there is still room for growth in steel demand in 2021 compared to this year. However, the demand for steel products may fall steadily in the beginning of 2021. On the one hand, due to the cold weather and the Spring Festival in February, a large number of infrastructure construction sites and factory operations have been suspended; on the other hand, as the winter deepens, the overall start of real estate will further shrink. In addition, under the current trend of substantial easing of foreign currency liquidity, the domestic commodity market will also rise. Therefore, how to adjust internally and externally will have a greater impact on the overall commodity market price in the next period of time.
Steel mills may continue to tighten production. From January to February, steel mill production may continue to tighten on the basis of December. On the one hand, the environmental protection production restriction policy may be more stringent, which will impose certain restrictions on the production of steel mills; second, the current steel prices are still relatively high, which has a certain restraint on market demand; third, as the temperature further drops, domestic demand may Speed up stagnation. Under the superposition of various factors, steel mills are relatively cautious in production.
The price of iron ore may drop to a certain extent in the short term. The current iron ore price is still running at a high level, which brings greater cost pressure to steel companies. As the domestic steel market enters the off-season, and the regulatory authorities have implemented appropriate control measures on the disorderly rise of iron ore, iron ore prices may return to the fundamentals, and there may be some room for decline in the first two months.