In the steel price market trend catalyzed by this round of "power rationing and production restriction" for energy saving and emission reduction, large steel mills have predictably taken over the baton of price increase. Yesterday, Baosteel announced its product price policy for October. The prices of its mainstream products rose by RMB 110-300 per ton. The industry expects that prices from other mainstream steel mills such as Angang and Wuhan Iron and Steel will also rise. Earlier, Hebei Iron and Steel and Shagang had both raised their latest product prices.
According to Baosteel's October price list, its hot-rolled products, including low-carbon steel, ultra-low carbon steel, and general cold-formed steel, increased by RMB 300/ton. Other varieties increased by RMB 150/ton. General cold-rolled products increased by RMB 110-200/ton, hot-dip galvanized steel increased by RMB 260/ton, and high-end non-oriented silicon steel increased by RMB 350-380/ton. Thick plates generally increased by RMB 150/ton.
Baosteel's price hike is not only related to the demand in the traditional peak season of the fourth quarter but also undoubtedly due to the energy-saving and emission-reduction storm in regions such as Hebei, Shanxi, and Jiangsu. Although the decrease in output caused by energy saving and emission reduction has not yet been clearly reflected, the expectation of reduced supply supporting steel prices has strengthened. According to Hu Yanping, an analyst at United Iron and Steel Network, China's crude steel production in September will decrease by more than 5 million tons compared to the monthly average production of the first eight months, with daily production decreasing to below 1.6 million tons, preliminarily estimated at 1.52-1.57 million tons.
Hebei Iron and Steel, caught in the storm, announced today that its Tangshan, Handan, and Chengde branches have successively received power rationing and production restriction notices from local governments. Preliminary calculations show that the production restrictions at these three branches will result in a reduction of approximately 1.5 million tons in crude steel production from September to December, accounting for 6% of the company's annual planned crude steel production.
While steel mills are passively restricting production, downstream industries' demand for raw materials, including steel, is increasing. The comprehensive inventory index of key steel-using industries in August was below 50%, far lower than around 60% in March, indicating that raw material inventories remain at a low level. Meanwhile, the new order indices of several major steel-using industries, such as machinery, all rose month-on-month, with some even exceeding 60%.
The price increase can obviously partially improve the profit situation of steel enterprises. According to statistics from the China Iron and Steel Association, the total profit of 77 key large and medium-sized steel enterprises in July was only RMB 2.86 billion, down nearly 50% month-on-month, and the profit situation in August remained less than ideal.
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