Steel demand gradually recovers, steel prices have room to rise

The steel market demand in July and August was better than in previous years, showing that the market is not weak in the off-season. According to data released by the China Iron and Steel Association recently, according to the production estimates of key steel companies, a total of 40,928,900 tons of steel were produced nationwide in late July 2020, a year-on-year increase of 10.01%. At the same time, the social stock of steel fell by nearly 40% from its peak in early March.

In this regard, analysts believe that due to the impact of the epidemic, many construction projects have been delayed and demand lags behind. Therefore, downstream demand is more resilient, which offsets the overall off-season impact. At the same time, the recovery of the manufacturing industry supports the improvement of demand in the iron and steel industry, and the boom in market supply and demand has a clear role in promoting the strengthening of steel prices.

In addition, in the medium and long term, the "new infrastructure" demand for steel has increased steadily, which will drive the growth of steel consumption in some areas. Some institutions predict that the direct steel consumption of the new infrastructure will reach 33 million tons this year.

Huaan Securities analyst Shi Lin also said that it is expected that in the third quarter, as downstream demand will increase, the shipment situation of steel mills will improve, and inventory is expected to further decline. Although affected by the spread of the overseas epidemic, the external demand for steel has been under pressure, but the resumption of work and production in various countries has accelerated the combination of factors such as flooding of liquidity, and it is expected that the prices of major industrial products such as steel will remain strong.