The steel pmi in June 2022 shows that the market supply and demand are declining simultaneously, and the operation of the industry is relatively sluggish
Judging from the steel industry PMI surveyed and released by the China Federation of Iron and Steel Logistics Professional Committee, in June 2022, it was 36.2%, a month-on-month decrease of 4.6 percentage points, and the operation of the steel industry was relatively sluggish. Judging from the changes in the sub-indexes, the impact of the epidemic is still ongoing, and downstream demand has contracted, driving the overall decline in steel prices and the decline in the production of steel mills. It is expected that in July, the overall market demand will continue to be weak, the production of steel mills will remain low, and the prices of steel and raw materials will fluctuate at a low level.
In June, the domestic epidemic situation improved, but the impact of the epidemic on the demand side of the steel industry continued, and the demand for steel failed to be effectively released. First, the logistics obstruction affects the release of demand. As an important production place and distribution hub for the domestic steel industry, Shanghai has gradually lifted the lockdown in June, but the freight logistics with other regions in East China is actually still largely stagnant. Second, the epidemic has caused some steel-using enterprises to have difficulty in running, closing or closing down. , its market demand has not recovered due to the improvement of the epidemic, or even disappeared directly; third, the investment in the real estate market is relatively sluggish, the new housing construction continues to decline, and the support for steel demand has weakened. From January to May 2022, real estate development investment year-on-year It fell by 4%, the newly started housing area fell by 30.6%, and the funds in place for development enterprises fell by 25.8% year-on-year. The real estate consumption market has fallen into freezing point, resulting in very low market confidence and extremely weak demand support for bulk commodities. In addition, the recovery of construction machinery, home appliances, automobiles and other industries is still insufficient, and the demand for steel is weak. Taken together, the demand for steel continued to shrink in June. The new order index was 25.9%, down 6.5 percentage points month-on-month, declining for 4 consecutive months and hitting a record low. In terms of steel terminal transactions, judging from the monitored terminal wire and screw procurement data in the Shanghai stock market, although Shanghai terminal procurement continued to recover in June, it was far lower than the same period in previous years.
The decline in demand has driven the overall decline in steel prices. In early June, affected by the improvement of the epidemic prevention and control situation and the gradual unblocking of Shanghai, the market sentiment tended to rise, driving steel prices to rise slightly. Shanghai rebar prices fluctuated from 4,775 yuan/ton on June 1 to 4,812 yuan/ton on June 9. Since then, due to the continued obstruction of logistics, the limited release of demand, and the negative impact of the Federal Reserve's interest rate hike, the market price has fallen rapidly. By June 22, the price of rebar in Shanghai dropped to 4,221 yuan/ton, the lowest value in the month, with a drop of nearly 600 yuan/ton in the month. Raw material prices have also dropped significantly. First, the decline in steel market demand led to a weak rise in the raw material market, and second, the Fed’s interest rate hike led to a correction in global commodity prices. The purchase price index in June was 29.7%, down 5.9 percentage points from the previous month. Judging from the situation reflected by enterprises, although the price of raw materials has dropped significantly, the price of steel has dropped even more, and the profit margin of steel mills has been further compressed.
Due to weak demand and the contraction of steelmaking profits, steel mills are not willing to produce enough, and the supply side is showing a downward trend. The production index in June was 34.1%, down 8.6 percentage points from the previous month. According to the statistics of China Iron and Steel Association, as of mid-June, the cumulative daily output of crude steel by key statistical enterprises in June was 2,273,300 tons, down 1.29% from the previous month; the daily output of pig iron was 2,040,700 tons, up 0.50% from the previous month; A month-on-month decrease of 1.09%. Since late June, the sharp drop in steel prices has further reduced the profits of steel companies, which led to the spontaneous joint maintenance and production reduction of steel companies in various places, which to a certain extent further reduced the output in the second half of the month.
In July, the steel market demand may continue to run weak as a whole. First, July is the traditional off-season for the steel industry. The high temperature and rainy weather is not conducive to construction on site, which will suppress the release of steel market demand to a certain extent. Second, the problem of obstruction of freight logistics caused by the epidemic may still remain, which will have a certain impact on the recovery of demand. Third, the current capital situation has turned slightly looser, but in light of the actual market conditions, a considerable number of enterprises have suffered from business crisis after the impact of the epidemic, which may have a certain impact on the later credit issuance. Therefore, in the choice of industries and enterprises, funds are avoided in advance. Risks will also delay the recovery of the real economy, and the related steel demand will also rise weakly. Although the manufacturing and construction industries will gradually recover with the continuous implementation of the policy of stabilizing the economic market, there is limited room for steel demand to rebound in the short term. On the whole, the support for steel demand in July was relatively weak, and the market demand may be released faster after September.
Steel mill production continues to run at a low level. In June, many steel mills voluntarily carried out blast furnace maintenance to reduce production. Under the circumstance of insufficient market demand and declining steelmaking profits, it is expected that this trend will continue in July, and the production of steel mills will remain relatively low. The production and business activity expectation index in June was 45.2%, down 2.2 percentage points from the previous month, the lowest since 2022, indicating that steel mills lacked confidence in July.
The market price fluctuated at a low level. With the supply side and production side both tight, steel prices are expected to achieve a weak balance. After the sharp drop in June, there is limited room for steel prices to drop in the market outlook, but practical factors such as demand have led to insufficient motivation for price increases. Steel prices are expected to fluctuate at a low level in July. In terms of raw material prices, the low production operation will lead to a decline in the demand for raw materials, and the support for iron ore and other materials will weaken, and the prices are expected to fluctuate at a low level.
