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2024-12-26

Have steel prices bottomed out? When will the time for 'winter storage' arrive?

The countdown to 2024 has begun, and some steel mills have gradually released their 'winter storage' policies, but the market response has been tepid. Currently, there are few steel traders preparing for 'winter storage'. What is the reason for this situation? When will this year's 'winter storage' fully start?

According to a survey by Lange Steel Network, the main factors causing steel traders to delay starting 'winter storage' are that current prices have not yet reached their psychological expected levels, and the severe losses from last year's 'winter storage' along with a relatively weak overall expectation for next year have led them to completely abandon 'winter storage' and choose to 'lie flat'.

Recently, reporters interviewed some regional heads of Lange Steel Network to investigate local traders' psychological prices and willingness for 'winter storage'. Li Cong from Lange Steel Network's Northern Service Department stated that the psychological price for 'winter storage' among steel traders in Beijing is around 3100 yuan/ton, while the current market price is about 3280 yuan/ton. Therefore, there are currently few steel traders actively engaging in 'winter storage'.

At the same time, in the Beijing area due to maintenance at mills like Chenggang and Jingye,steel millsproduction has decreased, and the arrival situation in the Beijing market in December is poor. As a result, there is currently a lack of specifications in the market. Coupled with the fact that mainstream steel mills have not yet issued 'winter storage' policies, this year's 'winter storage' period in Beijing may be postponed to January.

Liu Yizhi, an analyst from Lange Steel Network's Central China Service Department, stated that currently the psychological price for 'winter storage' among steel traders in Hubei and Anhui is below 3200 yuan/ton, ideally around 3100 yuan/ton. However, the average price of mainstream steel mills in Hubei in December is 3320 yuan/ton, and in Anhui it is 3360 yuan/ton. At the same time, current market inventory is lower than in previous years, leaving limited room for price reductions. Therefore, the market mainly sees passive 'winter storage', with very few traders engaging in active 'winter storage'.

Li Xiaojuan, head of Lange Steel Network's Shaanxi region, stated that currently the prices of mainstream steel mills in Xi'an are between 3270 yuan/ton and 3280 yuan/ton, which is more than a hundred yuan higher than traders' psychological price for 'winter storage'. Therefore, there are currently very few people in the market actively engaging in 'winter storage'.

Liu Linyu from Lange Steel Network's Sichuan-Chongqing Service Department stated that currently steel traders' psychological price for 'winter storage' in the Sichuan-Chongqing market is between 3000 yuan/ton and 3100 yuan/ton. The current prices differ significantly from these psychological levels; therefore, there are few traders planning to engage in 'winter storage', and some who intend to do so are choosing to reduce their quantities. Additionally, many steel traders believe that with uncertainties regarding next spring's price trends, engaging in 'winter storage' at prices above 3100 yuan/ton carries significant risks and is not conducive to stable operations next year.

So, are current steel prices high or not?

If we look purely at market price performance, current market prices are not considered too high. After a significant increase in September, steel prices have seen adjustments in October and November and have remained slightly volatile in December. Currently, prices are still more than two hundred yuan higher than the low point in August. However, it is worth noting that both spot and futures prices for rebar are at their lowest levels for this time of year in nearly seven years.

The market is more concerned about uncertainties for next year. Many steel traders have indicated that recently a series of stimulus policies have been introduced but the market response has been diminishing. Only when relevant policies are truly implemented and result in tangible workloads can market demand genuinely recover. Until then, most steel traders choose conservative operations focused on stability to minimize market risks.

From a fundamental perspective, the market is currently experiencing a situation of both weak supply and demand. We have now entered the traditional demand 'off-season', compounded by this year's Lunar New Year being relatively early; thus, the rate of demand decline will continue to accelerate. Meanwhile, production remains on a downward trend.SteelThe latest data released by the China Iron and Steel Industry Association shows that by mid-December, key statistical steel enterprises produced a total of 19.77 million tons of crude steel with an average daily output of 1.977 million tons, down by 2.3% month-on-month.

However, there are reports that some steel mills will gradually resume production by the end of December; attention should be paid to their resumption status.It is worth noting that social inventory this year is relatively low and continues to decline.According to monitoring data from Lange Steel Cloud Business Platform on December 25th, social inventory of steel products in 29 key cities was at 6.634 million tons, down by 133 thousand tons from the previous week with a decrease rate of 1.96%. It has now achieved six consecutive declines with a total drop of 852 thousand tons and a decrease rate of 11.38%, indicating that inventory accumulation speed is significantly slower than previous years. Additionally, according to Lange Steel Network's survey, social inventories in Wuhan, Hefei, Xi'an, Sichuan-Chongqing and other areas are all below last year's levels; some regions have also experienced noticeable shortages of specifications.

In summary, given that overall inventory is low and production has not seen significant increases yet, overall market risks are minimal; there is little likelihood of substantial declines in steel prices in the short term. However, current steel prices remain significantly above traders' psychological price levels for 'winter storage', making it difficult to boost enthusiasm for 'winter storage'. Future attention should be paid to whether steel mills will introduce more favorable 'winter storage' policies.