Limited demand growth makes it difficult for steel prices to improve.
In the first quarter, global economic growth faced numerous challenges. Following the Trump administration's assumption of office, international trade friction increased continuously, and global trade protectionism intensified. Domestically, with shrinking construction demand, the economy is in a critical period of structural adjustment and transformation and upgrading, increasing the uncertainty of economic growth. Steel Market Demand is unstable, and the demand performance varies among different varieties and downstream industries. Among them, the demand for plates performed relatively well last year, driven by the growth in exports of automobiles, home appliances, and other goods, while Construction steel Demand is relatively weak, affected by factors such as adjustments in the real estate market.
In mid-to-late March, the author investigated black industrial enterprises in the Beijing-Tianjin-Hebei region. Based on the feedback from the market, Rebar Demand is generally moderate, market supply is cautious, and the supply-demand contradiction is relatively small. The scale of electric arc furnace (EAF) steel production resumption in North China is relatively restrained, while the output of EAF steel in East and South China has increased relatively quickly, and inventories are low. The impact of the trade war on plates is relatively limited, supported by policies such as the "two new" policies, Cold-rolled demand performed better than Hot-rolled Currently, steel demand has not yet peaked, and the market is also waiting for the performance of demand and Pig iron production The turning point is coming. In April, steel mills are generally still in the process of resuming production, and the Price of iron ore raw materials is supported. The supply of coking coal is under significant pressure, and downstream Coke inventory is high, and coking coal lacks demand elasticity. The expected long-term contract Price of Mongolian coal in the second quarter has been lowered, and the cost center of warehouse receipts continues to shift downward, remaining relatively weak in the black industrial chain. Plates have maintained a high supply for the past two years, and the output of building materials has fallen significantly. This year, the profitability of steel mills is significantly better than last year, but steel mills are cautious and restrained in production and will not blindly expand production. The National Development and Reform Commission proposed that crude steel production control will continue to be implemented in 2025 to promote the reduction and restructuring of the steel industry. This year, there has been much discussion in the market about supply-side reforms in the steel industry. From the perspective of reducing production alone, the tone of implementing crude steel production control in recent years has continued, and under the background of steel mills' self-discipline in reducing production, it may not require too much external regulatory intervention. In the long run, the steel industry still has excess capacity, and the industry is under pressure to clear capacity. Policy-based capacity control is also possible, but the actual implementation of capacity control policies still faces many practical considerations.
In general, the steel industry is in a cycle of declining total demand and low profits. In recent years, profit pressure has been transmitted upward, Refractory materials The profit pressure on the end is becoming increasingly apparent. Overseas mines are in a new round of capacity expansion cycle. In addition to projects with early capacity ramp-up, projects such as Simandou and Rio Tinto's Western Slope are also put into production, Iron ore costs are decreasing, and supply pressure is gradually becoming apparent. Domestic Scrap steel resources are limited, the industry is not highly standardized, and its bargaining power in the industrial chain is weak, and the substitution effect of scrap steel on iron ore is still weak. In terms of coking coal, the tone of domestic supply guarantee and Price stabilization remains, and Mongolia encourages Coal resource exports, and the expected pressure from new Mongolian coal supply is still relatively large. The long-term contract Price of Mongolian coal is expected to continue to decline in the second quarter, and the loose supply pattern of coking coal and coke will continue. From the perspective of the entire industrial chain, iron ore still has strong bargaining power in the industrial chain, but its backwardation structure is clearly flattening.
Currently, steel mill inventories and social inventories are lower than the same period last year, and are relatively healthy overall. Steel mill profits have rebounded, production is cautious, and pig iron production has rebounded. The market expects that steel and pig iron production will peak and decline in April. In terms of demand, the trade war continues to escalate, and exports are difficult to maintain high levels. In terms of building materials, the area of new housing starts is lower than market expectations, and infrastructure demand will only improve after funds are in place. The "two new" policies are exerting their efforts, and manufacturing demand is good. Looking forward to the second quarter, the overall Price trend of steel may be weak and volatile, showing a "high in the beginning, low in the end" trend. Although the resumption of production and work in the downstream and the expected peak season demand in April may bring about a short-term warming of demand, factors such as declining external demand and loose refractory materials supply will still suppress the room for Price rebound. Investors need to continue to pay attention to changes in the production rhythm of steel mills and crude steel reduction policies.
