Abstract
Projection: ‘Holiday-in-place’ policy supported the demand
pre and during Lunar Chinese New Year holiday, and will also generate the
early startup after the holiday. Supply of steel is falling. The raw
materials supply tension will continue.
SteelHome predicts that Chinese steel market price
will go up in February.
Trading Tips: Steel companies should build up raw materials
stockpiles; distributors may buy in if they have solid sales channels and
sufficient money on hand; end users may place the bookings when necessary;
derivatives participants may buy the long 2105 contracts.
1 Review on China steel market in January 2021
Chinese steel market prices decreased slightly in
January. The rise of Covid-19 increased the uncertainties. At the end of
month, the move of People’s Bank of China to reclaim fund tightened the
liquidity in the market. Meanwhile, the raw materials shortage remained in
the place, which as a result constrained the price fall in steel.
By January 28, SteelHome China Steel Price Index (SHCNSI)
was 4,774 yuan, down 42 yuan from end of December. By product, longs index
(SHCNSI-L) was 4,422 yuan, down 7 yuan; flat index (SHCNSI-F) was 4,753
yuan, down 109 yuan; special steel index (SHCNSI-S) was 5,132 yuan, down
17 yuan; stainless steel index (SHCNSI-SS) was 15,854 yuan,up 1076 yuan.
Steel Futures Contracts: 2105 rebar futures
contract and HR futures contract traded on Shanghai Futures Exchange
closed at 4,275 yuan and 4,423 yuan, a decline of 113 yuan or 131 yuan
from the end of December.
Table 1: SteelHome Steel Price Index and Futures
Contracts in SHFE
|
Steel index
|
Longs
|
Flats
|
Special Steel
|
Stainless Steel
|
Rebar contract
|
HR coil
|
|
SHCNSI
|
SHCNSI-L
|
SHCNSI-F
|
SHCNSI-S
|
SHCNSI-SS
|
RB2101
|
HC2101
|
Jan.28, 2021
|
4774
|
4422
|
4753
|
5132
|
15854
|
4275
|
4423
|
Dec.31, 2020
|
4817
|
4429
|
4862
|
5149
|
14777
|
4388
|
4554
|
Up/down
|
-42
|
-7
|
-109
|
-17
|
1076
|
-113
|
-131
|
Source: SteelHome Database (to try the terminal
with link http://www.steelhome.cn/application/steelhomedata_en.zip)
2 Market Inventory Climbing up; BF Operating Rate
Still High While EAF Rate Falling; Transactions Higher on Year
2.1 Inventory
According to SteelHome survey, the combined
inventory of five steel products in market and mills by January 28 totaled
18.73 million tons, a rise of 3.64 million tons over the month, while a
rise of 3.8 million tons compared to the two weeks before 2020 Lunar
Chinese New Year.
2.2 Operating Rate of BFs and EAFs
According to SteelHome survey, by January 28, BF
operating rate of major steel mills in China was 93.34 percent (on the
basis of capacity), a drop of 0.85 percentage points from end of December.
The operating rate of independent EAF-based mills was 65.76 percent (on
basis of capacity), a drop of 12.97 percentage point.
2.3 Market Transaction
According to SteelHome survey, daily transaction of
rebar, medium plate and HR coil of distributors in major steel
marketplaces on January 28 was 52,200 tons, 19,400 tons and 17,000 tons,
down 34.3 percent, 9.4 percent and 20.6 percent from the daily trade in
the counterpart time in 2020.
Table 2: Steel Inventory in Marketplaces Before
Lunar Chinese New Year Holiday
Quantity in ton
|
before 2020
Lunar Chinese New Year
|
before 2021
Lunar Chinese New Year
|
|
Rebar
|
Medium plate
|
HRC
|
Rebar
|
Medium plate
|
HRC
|
6 weeks ago
|
68780
|
19324
|
17782
|
79422
|
21415
|
21451
|
5 weeks ago
|
63841
|
18501
|
17288
|
79979
|
24034
|
22399
|
4 weeks ago
|
61993
|
18164
|
16946
|
74770
|
22371
|
21613
|
3 weeks ago
|
58257
|
17087
|
16613
|
68932
|
21288
|
20363
|
2 weeks ago
|
36215
|
11561
|
11283
|
52195
|
19393
|
17037
|
1 week ago
|
17638
|
6008
|
5563.1
|
15099
|
12008
|
7619
|
Source: SteelHome Database (to try the terminal
with link http://www.steelhome.cn/application/steelhomedata_en.zip)
3 Forecast of China Steel Market for February 2021
3.1 Crude steel production
According to National Bureau of Statistics, the
production of crude steel, pig iron and steel products in December was
91.25 million tons, 74.22 million tons and 120.34 million tons, up 7.7
percent, up 5.4 percent and up 12.8 percent on year.
The daily production of crude steel in the given
time was 2.9435 million tons; and that of pig iron and steel products was
2.3942 million tons and 3.8819 million tons.
As per data from General Administration of Customs,
China imported 1.375 million tons of steel in December, down 7.3 percent
on year; exported 4.85 million tons of steel, up 3.5 percent on year. The
import of billet was 0.865 million tons and export 90 tons.
The supply of crude steel and steel products in
December was calculated at 88.42 million tons and 116.87 million tons, up
7.6% and up 12.9% from the previous period.
In view of the control and prevention of Covid-19 in
Hebei province and the decelerating pace in EAF utilization rate, the steel
production in January will be lower than December volume. In February,
most of EAF-based mills will stop operation, the move will result into the
decline in crude steel production.
SteelHome predicts that in February, daily crude
steel output will be 2.9 million tons; steel import to fall below 1
million tons; steel export to climb up to 5.5 million tons; The apparent
supply of crude steel 76.91 million tons, up 6.2 percent on year.
Table 3: Forecast on China Crude Steel Production,
Steel Import/Export in February
Quantity in 10,000 tons
|
Feb 2021 e
|
Feb 2020
|
Change
|
Change%
|
Crude steel production
|
8120
|
7482
|
638
|
8.5
|
Steel import
|
100
|
99
|
1
|
1.0
|
Steel export
|
550
|
378
|
172
|
45.5
|
Billet import
|
50
|
58
|
-8
|
-13.8
|
Billet export
|
0.2
|
0.24
|
-0.04
|
-16.7
|
Crude steel supply
|
7691
|
7243
|
448
|
6.2
|
Source: SteelHome Database (to try the terminal
with link http://www.steelhome.cn/application/steelhomedata_en.zip)
3.2 Construction Steel Demand to Outnumber The Same
Time in History
Because of the rise in Covid-19 and the proposed
‘holiday-in-place’ advocate, Ministry of Transport projects that the
number of travelers for celebrating the traditional holiday will be 1.152
billion, with daily 28.8 million people each day, a drop of 60 percent
from the same time in 2019 or a drop of 20 percent from the same time in
2020. If most of migrant workers stay in the cities instead of travelling
back to hometown, the steel demand for industrial and construction sites
will be stronger than the same time in the history. What’s more, the
demand will recover quickly after the long festival season.
3.3 Iron Ore and Coke Supply Tension to Continue
The iron ore supply shortage seems to be clear in
the first half year of 2021, as global crude steel production will be
rising, stimulated by the price surge.
The supply tension in coke will sustain. On January
28, the coke inventory of coke producers, ports and steel mills came to
0.196 million tons, 2.505 million tons and 4.736 million tons, pretty low
rate.
3.4 POB Tightened Liquidity in January, but
Monetary Supply in Feb to Loosen
During January 25-28, People’s Bank of China
tightened the liquidity via public market, with the 568.5 billion RMB
reclaimed in four days.
Monetary policy will continue to support economic
recovery, and we will secure the consistency, stability and continuity,
said Mr.Yi Gang, Head of central bank. In other word, the money
recollection at the end of January will not sustain. Then we still expect
the loose monetary supply in February.
3.5 MIIT Minister: China Vowed to Press down Crude
Steel Capacity
China will gradually establish system to control
carbon emission, pollutant emission, total energy consumption so as to
realize the reduction in crude steel production in 2021.
According to CEADs, the total CO2 emission in 2017
was 9.339 billion tons, consisting of 1.677 billion tons from ferrous
smelting industry, a 17.96 percent share in the total. With the carbon
peak in 2030 and carbon naturalization target for 2060, China steel
industry will find it heavily pressurized in cutting carbon emission.
The current measures to press down crude steel
production: a) to implement new version steel capacity replacement policy.
However, SteelHome estimates an expansion in steel capacity in 2021
despite of the severe replacement move; b) the speedup in M&As; c) the
acceleration of industrial structural adjustment in integrated and
short-process mills.
Given the robust steel demand at home and abroad in
2021, SteelHome finds it difficult to reduce crude steel production in the
year.
3.6 Conclusion
2021 Spring Festival (Lunar Chinese New Year) may
be an exception for steel demand, on the back of holiday-in-place
advocate. The collective maintenance in EAFs and the production stoppage
before the holiday will generate the decline in steel supply. The recovery
in steel production, high price and raw materials supply tension will go
on, a strong support for steel price. In short, SteelHome foresees an
uptrend in Chinese steel market price in February.
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