Steel prices near the bottom of the valley with excess capacity
Some employees in Baosteel's sales department have been working overtime lately, adjusting the sales budget for the first half of the year. Frequent revisions like these are uncommon in previous years. This year's volatile steel market has made it difficult for Baosteel to accurately forecast its annual budget. "We're looking ahead to the market, so the sales budget needs constant updates," said a mid-level manager from Baosteel. After a sharp drop in orders since October last year, the company saw a rise in orders during April and May. "Of course, this is a month-over-month comparison; compared to the same period last year, the order volume is still low."
This cautious optimism about the future market may hide risks such as overcapacity and unrecouped exports. Whether the steel industry can recover depends largely on how quickly production capacity is released. Since late 2008, the steel market has experienced wild swings, leading many companies to suffer heavy losses. High-priced inventory became a major issue, with the entire industry losing momentum for four months starting in October.
In early 2009, the steel sector briefly rebounded before other industries, with prices rising for several weeks. However, this trend faded after the Spring Festival. From the festival until now, steel prices have fallen for seven consecutive weeks. Industry experts believe that the previous price surge was based on false demand, prompting steel mills to resume operations in mid-December. Meanwhile, downstream demand continued to weaken, and terminal demand remained sluggish. The de-stocking process also increased spot market inventories, causing severe losses for traders.
According to data from the China Iron and Steel Association, China’s crude steel output has surged since December last year. Daily output exceeded 1.2 million, 1.3 million, and 1.4 million tons in successive months, reaching 1.444 million tons in February—equivalent to an annual output of 520 million tons (up from 500 million tons last year). This rapid increase in production has led to a significant rise in social inventories. By late February, steel inventories in 20 major cities reached 6.7 million tons, up 137.9% from January.
This trend was temporarily curbed in March when a major steel mill shut down. As of March 25, 11 iron and steel companies announced maintenance shutdowns, including Baosteel, Benxi, Shagang, Laiwu, and Angang. Anshan Iron & Steel also plans to cut output in April, while Tangshan Iron & Steel began scheduling maintenance for its rolling lines in April and May.
"Prices in May and June should gradually improve because many large projects start around that time, such as the Shanghai-Hangzhou high-speed railway, which will require over 1 million tons of rebar over two years," said Zhang Fugui, a manager at Shanghai Shunchao Enterprise Development Co., Ltd. This view is shared by most steel traders, who expect demand to surge if production is temporarily controlled.
Wang Anguo, general manager of Anguo Trading Co., Ltd. in Shenyang, said, "Although it's still unclear, I feel that steel prices are close to the bottom. It's estimated that 'May Day' will bring some stability to prices."
However, not all industry players are optimistic. A senior executive from a large northern steel plant believes the market may see a slight rebound in April, partly due to the recent launch of steel futures. But the biggest challenge remains weak demand. Direct exports and industrial exports (indirect exports) show no signs of recovery, and this reduced demand could return to the domestic market, increasing pressure.
The executive also noted that the national 4 trillion yuan investment is mainly driven by infrastructure projects, which may boost steel consumption in the short term. However, it could also lead to small and medium steel mills resuming operations and expanding capacity, worsening the supply-demand imbalance. "Temporary balance is achieved through production cuts, but it cannot solve the problem of overcapacity unless some companies exit the market completely."
steel plate bridge,corrugated steel plate bridge,steel plate for bridge,Paving plate
Shandong Fengbao Metal Products CO.,LTD. , https://www.fengbaosteels.com