What are the factors that are certain for the steel market heading into 2024? What factors are uncertain?
From the perspective of demand, in 2024, the domestic macro economy will continue to recover and improve, and the overall upward trend will be maintained, and various steel-related indicators are expected to warm strongly. In this context, it is expected that the steady growth trend of total steel demand (including exports) will not change. In order to achieve a "good start" in the new year, the introduction of new stimulus policies is expected to accelerate, coupled with the continuation of the effect of policy measures to stabilize growth, it is expected that the performance of steel demand in the first quarter of 2024 will not be too bad.
According to the national PMI (purchasing managers' index) in November 2023, the production index continues to expand, and the steel-consuming industry indicators are at a high level; The high growth of the business activity index of the construction industry and the continued acceleration of the construction progress of the construction industry indicate to a certain extent that the demand for steel at the beginning of the year is improving. On the optimistic side, demand in Q1 2024 is likely to increase by 3% year-on-year.
From the perspective of supply, there is great uncertainty on the supply side. Statistics from the China Iron and Steel Association show that from January to November 2023, China has produced a total of 952.14 million tons of crude steel, 810.31 million tons of pig iron, 125282 million tons of steel, an increase of 1.5%, 1.8% and 5.7% year-on-year respectively. Where there is demand, there will be supply, and the growth of demand at the beginning of the year will bring space for the release of steel production capacity.
From the perspective of costs, since the second half of 2023, especially after entering the fourth quarter of 2023, the prices of iron ore, scrap steel, coke and other steel raw fuels have continued to rise, and the resulting cost pressure will continue in 2024. According to the data, in November 2023, China imported 102.743 million tons of iron ore, an increase of 3.358 million tons or 3.4% month-on-month ； The average import price was 117.2 US dollars / ton, up 3.7% month-on-month and 24.3% year-on-year. In November 2023, the national iron ore price continued to rise. Among them, the average price of 66% grade dry base iron concentrate powder in Tangshan, Hebei Province was 1139 yuan/ton, up 4.6% month-on-month; The average price of 61.5% fine ore in Australia (Rizhao Port, Shandong) was 979 yuan/ton, up 5.3% month-on-month. Scrap prices are also on the upswing. In November 2023, the average price of heavy scrap in Tangshan, Hebei Province was 2,640 yuan/ton, up 2.5% month-on-month； The average price of secondary metallurgical coke in Tangshan, Hebei Province was 2143 yuan/ton, down 2.6% month-on-month, but it was still in a high position. According to the Lange Steel Research Center, the pig iron cost index measured using the production of raw fuel purchased in November 2023 was 134.3 points, up 0.8% month-on-month. Although domestic steel prices have risen during this period, on the whole, the increase in steel prices is much smaller than the increase in raw fuel prices. Therefore, it is expected that at the beginning of 2024, the support of the cost side to steel prices will continue.
From the inventory point of view, the monitoring data shows that as of December 1, 2023, the social inventory of steel in 29 key cities across the country is 831.1310,000 tons, down 8.2% month-on-month, although up 4.08% compared with the same period in 2022, it is still at a low level.
From the perspective of expectations, market participants are generally confident in the market in 2024 due to the continuous introduction of measures to stabilize growth and the expectation of the introduction of new policies at the beginning of the year. In particular, the Central Economic Work Conference held at the end of 2023 has injected strength into our confidence and confidence to do a solid job in economic work in 2024.
On the whole, for the steel market at the beginning of 2024, the increase in costs, increased demand, low inventories, and still strong confidence are certain, but the release of steel production capacity has great uncertainty. If steel production capacity is released more than expected, it will be the biggest pressure on the steel market at the beginning of the year.
(Source: China Metallurgical News).
