Demand continues to be released in April, steel prices will continue to fluctuate and rise

According to the latest report issued by the Iron and Steel Logistics Professional Committee of China Internet of Things, the PMI index of the domestic steel industry in March 2021 was 47.9%, a decrease of 0.7 percentage points from the previous month.

The sub-indices show that domestic steel demand has rebounded, and steel mills' production has declined due to environmental protection restrictions, which has driven raw material prices down from high levels, and steel prices fluctuated upward. The report predicts that domestic market demand will be further released in April, production may remain tight, steel prices are running at a high level, and iron ore prices will continue to fall.

The report pointed out that demand for steel continued to recover in March. March is the transition period from the traditional off-season to the peak season in the steel industry, and domestic steel demand has gradually recovered. The new order index was 47.1%, an increase of 3.8 percentage points from the previous month.

In terms of foreign demand, as the export tax rebate has not yet been determined, the wait-and-see sentiment of steel exporters has risen, and the current domestic sales income is relatively good, which has a certain substitution effect on exports. Steel exports, which have continued to rebound in the previous period, have been tightened. The new export order index was 43.7%, a decrease of 17.7 percentage points from the previous month, ending the fourth consecutive month of rising momentum.

Although demand has continued to recover, steel mill production has slowed down. The report pointed out that under the requirements of the "carbon peak" and "carbon neutral" targets, the environmental protection production restriction policy was once again strict in March, which imposed certain restrictions on steel production. The production index was 51.3%, down 3.4 percentage points from the previous month, indicating that steel mills' production has slowed down.

In terms of inventory, the report mentioned that, driven by the recovery of steel demand, the overall steel inventory fell in March. According to statistics from China Steel Association, steel mill inventories experienced a trend of rising first and then falling during the month. On the whole, the current steel mill inventories are showing a trend of accelerating consumption. The social inventory declined for the first time this year, and the inventory of the five major varieties rose and fell mixed. According to statistics from the China Iron and Steel Association, in mid-March, the social stock of five major types of steel in 20 cities was 17.28 million tons, a decrease of 490,000 tons from the previous ten days and an increase of 9.98 million tons from the beginning of the year.

Domestic steel prices fluctuated upward in March. According to the report, since March, domestic market demand has gradually recovered, but production has declined due to environmental protection policies. The overall market has been in a tightly balanced state, which has supported steel prices, and steel prices have continued to rise. According to Zhuo Steel Chain's data, the Shanghai Rebar Index was 4621 yuan/ton on March 1, which was the lowest value of the month, after which the price fluctuated and increased.

In addition, the prices of iron ore and coke fell in March, while the prices of other raw materials went up and down. On the whole, the prices of raw materials have fallen from high levels, and the cost of steelmaking has dropped. The main reason is the strict implementation of environmental protection restrictions on production, which has led to a decline in demand for raw materials, especially iron ore. The general 62% iron ore index began to fluctuate downward in early March. It was $159.55/ton on March 24, the lowest of the month; as of March 26, it fell by $14.9/ton in a single month.