**Cold Fall in the Steel Market: A Price Dilemma**
First, the current trend of pre-judgment:
**Raw Materials:**
This week, the Tangshan billet market experienced a strong start followed by a decline. After a rebound, prices fell by 10 yuan, then rose again by 10 yuan, and finally increased by 20 yuan compared to the same period last week. The market atmosphere was relatively strong in the short term, but transaction volumes weakened. On Wednesday, Yanyan Steel issued 3,195 contracts, which was 15 times higher than the current market level. While the market remained light, with the drop in temperature and the arrival of the "Golden September" season, merchants still maintained confidence in the market outlook. However, recent sluggish growth has led to a slight decrease in billet prices, weaker sales, and some impact on business due to weak snail (a type of steel product) performance. Despite this, high raw material costs and tight spot resources provide some support for billet prices. Therefore, the market outlook is stable, with small and medium-sized players expected to see a margin between 10-30 yuan.
**Iron Ore Market:**
This week, the iron ore market remained relatively quiet. The Platts Index for imported minerals dropped by $1, mainly due to lower bids from foreign mines. Spot prices stayed steady. Some steel companies reduced prices last week, but the goods received after the drop did not perform well. This week, prices were partially raised, but only slightly—generally by 5-10 yuan/ton. In terms of mine selection, the attitude was relatively optimistic, and most maintained normal shipping rhythms. Individual sellers were reluctant to sell. It is expected that imported ore will continue to oscillate around $138, while domestic mines will remain mostly stable, with slight increases in certain regions.
**Coke Market:**
The coke market continued its upward trend this week, rising by 20-50 yuan/ton, driven by better downstream demand. Steel mills showed positive purchasing activity, and coking coal prices also increased. With limited stock, coke prices saw an increase. This week, Hebei Iron and Steel Group raised its prices by 50 yuan/ton, boosting local market confidence. As the National Day and Mid-Autumn Festival holidays approach, demand for steel stocks is expected to rise further. It is anticipated that coke prices will continue to climb next week, with an estimated increase of 20-30 yuan/ton.
**Scrap Market:**
The scrap market saw a slight increase this week, mainly due to some manufacturers receiving average shipments and raising prices to attract sources. However, with the slow start of “Jinjiu†(a traditional Chinese festival), and only slight improvements in large steel enterprises’ arrivals, the market’s ability to sustain growth remains limited. Current market direction is unclear, and customer willingness to buy remains low. Sellers are not eager to sell at lower prices, so it is expected that the scrap market will remain weak in the near future.
**Pig Iron Market:**
The pig iron market remained stable and slightly stronger this week. In recent days, both raw materials and finished products have been consolidating narrowly. The market has a wait-and-see atmosphere. Some steel mills struggled to get goods at low prices, and turnover was poor, leading to weak iron prices. However, under the support of high costs, merchants have been reducing their prices slightly. Their willingness to ship is not high, and it is expected that the pig iron market will remain stable next week.
**Steel Market:**
This week, the Tangshan building materials market initially rose after being suppressed. At the beginning of the month, financial pressure eased, and cost support improved, leading to a more positive market sentiment and steady price increases. However, the lack of follow-up demand and sluggish performance caused prices to fall back. Although some markets have seen increased inventory, all parties are under pressure and do not want to make major adjustments. It is expected that steel prices will face a dilemma next week, with potential weakness.
**Profile Steel Market:**
Tangshan profile steel began to oscillate early this week, but due to high transaction volumes, it later weakened. On one hand, environmental protection policies have slowed down billet supply, and billet merchants are increasing sales, leading to higher procurement costs for profile steel mills, resulting in low profit margins and limited willingness to reduce prices. On the other hand, late in the week, heavy volume appeared, increasing shipping pressures and gradually eroding manufacturer confidence. Low-cost resources increased significantly on Thursday. Given the weaker-than-expected demand during “Jinjiu,†the market’s bullish sentiment has been revised. Both fundamentals and news face pressure, and it is expected that the market will remain weak next week, although the decline may be limited due to high costs.
**Pipe Market:**
The Tangshan pipe market remained stable and slightly stronger this week, with seamless pipes remaining stable and welded pipes increasing by 20 yuan/ton. Raw materials have become narrower and stronger. However, terminal procurement has continued to be sluggish. Although pipe mills have been willing to raise prices, actual demand has remained weak. With the gradual cooling of the weather, the proportion of downstream construction starts will increase, and pipe demand is expected to grow. However, due to uncertainty in the market outlook, businesses are cautious, and procurement remains small-scale. For the later trend, the market will need to adapt and adjust for a period before entering a rising phase. Pipes are expected to see a slight increase next week, within a range of 50 yuan/ton.
**Steel Strip Market:**
The steel strip market was slightly stronger this week. Leading steel mills accumulated gains of 40-50 yuan in the previous quarter and early this week. After the price increase, transactions turned weak, and prices stabilized in the second half of the week. During the “Golden September†period, there was increased supplier restocking, but steel mill inspections and maintenance increased. Ruifeng, Shengfeng, Guofeng, Baotai, and others all had 5-7-day maintenance plans, leading to a short-term output decline, which supported market prices. It is expected that strip steel will remain stable or weak next week.
**Current Operation Suggestions:**
**Raw Materials:** This week, the mainstream raw materials remained stable. With the coming of the National Day and Mid-Autumn Festival, demand for steel stocks will increase. It is recommended that businesses replenish small amounts weekly, seize opportunities, and ensure timely delivery. Traders should operate based on individual strategies and purchase accordingly.
**Steel Products:** This week, steel products fell slightly, and the market gained less. The emergence of low-cost resources continues to impact the mainstream. It is recommended that merchants enhance their de-stocking awareness, avoid market risks, optimize inventory structure, and adopt a “fast-forward and fast-out†low-stock operation mode to respond to market changes.
**Tangshan Market Overview:**
**Raw Materials:** This week, Tangshan raw materials were mixed. Due to unsatisfactory finished material transactions, although some local steel companies slightly increased the purchase price of iron ore fines, due to the decline in foreign minerals, upper-hand supply was limited, and middlemen were hesitant to enter the market. This week, iron ore remained stable. Coke and furnace burden saw a slight increase, and positive factors such as the manufacturing prosperity index continued to rise, pushing up the market slightly. Downstream steel purchases remained strong, while coking coal in the upstream continued to strengthen, forming strong support for the city. Due to earlier manufacturer arrivals, this week's burden increased slightly due to tight supply. This week, steel billets weakened. Affected by weak downstream profile, strip steel, and rebar turnover, merchants were hesitant to take goods, and transaction volumes were light.
**Steel Products:** Tangshan finished products weakened this week. This week, the 145 strip fell slightly. Affected by weak steel bills and lack of transaction support, the strip started operating weakly on Tuesday. In the absence of clear demand release, the strip fell by 30 compared to the beginning of the week. Although some pipe manufacturers had few stocks, it was difficult for them to accept orders significantly. Following the adjustment of raw material and strip prices, companies took profits and ensured normal sales. The enthusiasm for purchasing downstream building materials this week was still low, but some low-cost resources improved slightly. Under the influence of weak steel bills, prices returned to a weaker trend. The demand for “Jinjiu†was weaker than expected, and the profile transaction did not see heavy volume delays. Under the pressure of cost weakness, the pressure did not decrease, and the profile went down slightly.
**Industry News This Week:**
(1) China’s stainless steel crude steel output in 2020 is expected to exceed 25 million tons. Li Cheng, Honorary Chairman and Consultant of the Stainless Steel Branch of the China Special Steel Enterprises Association, stated that at the 8th International Stainless Steel Congress, China’s stainless steel production is likely to surpass 25 million tons, with apparent consumption likely exceeding 20 million tons. Li also mentioned that China has set long-term economic goals including stabilizing growth, adjusting structure, promoting reform, and benefiting people’s livelihood, aiming to achieve the “new four modernizations†(industrialization, informatization, urbanization, agricultural modernization). Decisions to boost railway investment, urban infrastructure, energy conservation, and information consumption will drive the development of the stainless steel industry.
(2) Coal prices saw partial increases in the second half of the year. Although downward pressure on some coal prices has not decreased, some coal varieties have risen in different ranges, bringing hope for a price rebound to the coal market, which has been falling for a long time. However, there is still a large downward trend in coal prices in the future. It is expected that coal demand will continue to rise slightly in the third quarter and the second half of the year. Production capacity will continue to expand, and with increased imports, the market will show a loose supply-demand trend and structural surplus. Overall social inventories remain high, and coal prices will continue to face downward pressure. The task of de-capacity and destocking in the industry is arduous, and business operations will face greater difficulties.
(3) Unresolved crises have plagued the Shougang Peruvian company for over 20 years, including labor disputes. According to Reuters on September 3, workers at SHP.LM, the Shougang Hierro Peru Co., Ltd. of China’s Shougang Group, began an indefinite strike in mid-August, demanding higher wages and improved working conditions. Due to the breakdown of negotiations between the company and union workers, the Shougang Hierro Peru Co. has faced numerous incidents over more than 20 years, causing labor disputes. The stumbling blocks for the operation of overseas mining enterprises have not yet been resolved. A middle-level official of Shougang privately said: “This incident is not new; it occurs several times a year and has not been fully resolved.†These ongoing strikes have brought significant economic losses to Shougang Hierro Peru.
(4) Increased iron ore shipments from Port Hedland were attributed to growing demand from China. According to official data from Port Hedland, iron ore shipments reached 27.4 million tons in August 2013, up from 26.6 million tons in July. The data also shows that China’s August iron ore imports reached 22.3 million tons, compared to 20.4 million tons in July. Bloomberg noted that China’s manufacturing sector resumed growth in August, indicating that the Chinese economy has stabilized after a two-month slowdown. The report suggests that China is expected to achieve a 7.5% GDP growth in 2013 and maintain this rate in 2014. Morgan Stanley believes that the increase in iron ore prices indicates a steady recovery of the Chinese economy.
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