In December 2023, the price of the main finished materials of the steel industry chain is strong, and its price performance is closely related to the strong operation of the raw material end. Looking forward to January 2024, under the current supply and demand pattern, it is expected that the price resilience of various products in the steel industry chain is strong.
The price center of gravity of the steel industry chain generally moved up but the range was limited. In December 2023, the price trend of steel industry chain products was dominated by strong shocks, and the prices of galvanized coil and stainless steel fell in a narrow range. Analyze the reasons for the formation of this trend: First, the price trend of raw material products is strong, giving strong cost support to the finished material. Taking coke as an example, in December, due to the entry of the heating season, the demand for raw fuel is correspondingly expanded, and the supply of coke is relatively tight. On the plate, affected by rain and snow, transportation in the main producing areas was limited, which exacerbated the tight situation of coke supply, and coke enterprises took the trend for the third round of increase. According to statistics, the price of primary coke in Shandong in December increased by 9.3% month-on-month. For long process steel enterprises, the increase in the cost of this part is more significant. Second, the situation of steel production line maintenance and equipment upgrading has increased. Because it is in the off-season of consumption, the demand for finished materials is mostly driven by the demand for winter storage, and its rigid demand is released to reduce, and steel mills take this opportunity to overhaul and upgrade equipment. The result is a corresponding decline in the supply of finished materials, and the market's expectation of tighter supply is reflected in the black futures board.
Steel upstream and downstream industry chain load is weak adjustment in December 2023 steel upstream and downstream main items operating rate narrow fluctuations, the main trend showed a decline. Among the finished materials, the operating rate of strip steel, galvanized sheet and welded pipe showed a narrow drop. The main reason is that after entering the heating season, some areas are affected by pollution weather, which has a certain impact on the construction of enterprises, making its operating rate fall. In addition, due to the rising prices of upstream raw materials, and the improvement of sales orders in general, high-price shipments are less, and prices are difficult to rise, making the profits of steel mills squeezed to a certain extent, and the production enthusiasm of steel enterprises has declined accordingly. Some steel mills take the initiative to repair the rolling line, and the operating rate has declined. At the raw material end, the average operating rate of scrap electric arc furnaces this month was 3.4 percentage points higher than last month. According to the analysis of the performance in the month, the profits of short-process steel enterprises have declined from the high point of the previous month, but there is still a certain profit space, so the production enthusiasm of steel mills is high. In addition, the steel enterprises with partial maintenance in the early stage resumed production this month, and further increased the operating rate.
Steel industry chain cost rise, profit decline in December 2023 steel industry chain product cost and profit differentiation operation. Data show that in addition to the cost of stainless steel affected by the decline in nickel prices, the cost of finished products in the month generally showed an increase, ranging from 0.76% to 6.63%. For finished materials, costs are transmitted from top to bottom. As the price of upstream charge products rises, the price of intermediate products rises accordingly. The cost of materials also increased due to the rising price of intermediate goods; In terms of profit, because the increase in cost is greater than the increase in sales price, product profits fall accordingly. From the analysis point of view, entering the off-season of steel consumption, although there is a certain winter storage demand, but because the performance of the real estate industry in the main steel consumption area is still in a steady landing stage, the market attitude towards taking goods is still more cautious.
It is expected that the fluctuation space of the steel industry chain will be narrowed in January 2024. The price trend of steel in January 2024 will take into account the impact of special cycle factors. On the one hand, January 2024 is the last month before the Lunar New Year, and based on historical experience, the trading atmosphere in the month will continue to weaken as the holiday season approaches. Some traders or short process production enterprises or early to enter the holiday. Therefore, it is expected that the supply and demand of steel products in January will tighten synchronously, and steel prices will not fluctuate more significantly. On the other hand, from a cost point of view, the price of raw fuel itself in the heating season is strongly supported, and it is expected to remain relatively high in January. Steel companies' profits are unlikely to recover significantly. The procurement of raw materials by steel mills is mostly based on the perspective of winter stock; The same is true for the material aspect, the reduction of downstream projects and the reduction of mass procurement behavior is not conducive to a wide rise in prices. On the whole, it is expected that the price volatility of steel products will be strong in January 2024, and the price fluctuation space will gradually narrow.
