Since May, the steel market has risen sharply, and the prices of various steel products have set historical records. Especially on May 10, the market price of Φ20mm HRB400E rebar, 5.75mm Q235B hot-rolled coil and 1.0mm SPCC cold-rolled coil in the mainstream domestic market rose to 6169 yuan/ton, 6570 yuan/ton and respectively. 6,975 yuan/ton. Except for cold-rolled coils, the prices of other major steel products almost all exceeded the 2008 level, setting a record high. In just a few trading days, steel prices have seen such a large increase, which is the first time in more than 20 years.

However, the callback after the big rise has begun to appear, especially on the raw and fuel side. On May 13, the price of iron ore futures fell by more than 7%, which was only one step away from the limit; the price of double coke fell by nearly 4%; the prices of rebar and hot-rolled coil fell by 6,000 yuan/ton and 6,500 yuan/ton respectively. Close, the single-day rise or fall is as high as 400 yuan/ton.

How long this unstable situation can last is still unknown. In my opinion, in the short term, even in June, steel prices will still slightly pull back. It is expected that the steel market will show a trend of "supply reduction and demand growth" during the year, and will not change the high-level operation trend. There may still be a new year-round price high in the second half of the year. 

From the perspective of leading policy factors in the steel industry, the "13th Five-Year Plan" period is a supply-side structural reform, and the "14th Five-Year Plan" period is a "dual carbon" policy (carbon peak and carbon neutral). The author believes that the trend of the steel market this year is mainly caused by the superposition of factors such as policy-led, overseas demand, sharp rise in raw material prices, and imported inflation.

Global commodity prices may continue to rise

Entering 2021, the global manufacturing industry will accelerate its recovery. As overseas demand increases and investment stabilizes and rebounds, the global manufacturing PMI (Purchasing Managers Index) continues to improve. The global manufacturing PMI reached 57.1% in April, staying above 50% for 12 consecutive months. Domestically, my country’s main economic performance indicators have performed gratifyingly. my country's manufacturing PMI reached 51.9% in April, which is in the expansion range for 14 consecutive months. At the same time, my country's economic development and operation situation has attracted the attention of the international community. Some international financial institutions have recently predicted that China's GDP growth rate is expected to reach over 8% this year.

In addition, under the influence of inflation, global commodity prices still have room to rise in the later stage. This year, the United States launched a US$2 trillion infrastructure stimulus plan. The Federal Reserve kept the benchmark interest rate unchanged at 0% to 0.25%, and stated that it would not change its quantitative easing policy until 2022.

The author predicts that global fiscal and monetary policies will continue to be loose in 2021. Under inflation expectations, global commodity prices are expected to continue to rise.

The pressure to reduce crude steel production is mainly concentrated in long-process steel enterprises

At present, under the stimulus of high profits, steel companies are more enthusiastic about production. According to statistics, as of early May, the blast furnace operating rate of 247 steel companies across the country reached 80.47%, and the capacity utilization rate reached 90.59%. The operating rate of independent electric furnace steel enterprises reached 71.1%, an increase of 10.4% year-on-year; the capacity utilization rate reached 76.4%, an increase of 17.2% year-on-year.

However, due to the weak restraint of the policy facing short-process electric furnace steel enterprises' production restriction, the pressure to reduce crude steel output during the year was mainly concentrated on the long-process steel enterprises. The author predicts that from May to December, the operating rate of domestic steel companies' blast furnaces will fall from a high level, and the operating rate of short-process steel companies will remain high. According to the author's calculation, the crude steel reduction is expected to exceed 60 million tons during the year.

The apparent consumption of crude steel will increase by 20 million tons

Entering 2021, domestic and foreign steel demand has grown steadily. With the introduction of the US$2 trillion infrastructure stimulus plan, overseas demand has grown substantially. In the first quarter of this year, my country's apparent consumption of crude steel reached 260 million tons, a year-on-year increase of 15.5%.

Benefiting from the recovery of the global economy and the manufacturing industry entering the boom cycle, my country's downstream manufacturing industry has sufficient orders. Since the beginning of this year, my country's steel structure has undergone certain changes, especially the volume and price of industrial materials and medium and high-end steel materials have risen. From the downstream point of view, with the acceleration of urbanization and the continuous advancement of urban agglomeration construction, real estate investment and infrastructure investment both achieved year-on-year growth; automobile sales increased, especially the first quarter production and sales of new energy vehicles exceeded 500,000, respectively Reached 533,000 vehicles and 515,000 vehicles, an increase of 3.2 times and 2.8 times year-on-year; the sales of heavy trucks, excavators, loaders and other machinery increased year-on-year by 31.4%, 54.9%, and 18.9% respectively; the production and sales of home appliances maintained steady growth, ranking first In the quarter, the domestic appliance market reached 190.3 billion yuan, a year-on-year increase of 47%.

In addition, the carbon neutral policy is expected to bring a clean energy market of nearly one hundred billion yuan, driving the steady increase in demand for clean energy and related equipment such as wind power, photovoltaics, nuclear power, natural gas, electric vehicles, and power transmission facilities. The author predicts that my country's apparent crude steel consumption is expected to increase by 20 million tons during the year.

The price of iron ore does not have the conditions for a sharp drop for the time being

In the later period, the trend of the raw material and fuel market will depend on the implementation of the production capacity and output "dual control" policy and the environmental protection and production restriction policy. It is expected that the price of raw materials and fuels will show a trend of "high before and low" during the year, and the trends of specific raw materials and fuels will diverge.

In terms of iron ore, global iron ore supply is expected to increase by 110 million tons. Among them, the output of Brazilian and Australian mines will increase by 25.44 million tons, and the output of non-mainstream mines will increase by 50 million tons. The author predicts that under the superimposed influence of the "dual carbon" policy, the "dual control" policy of capacity and output, and the environmental protection and production restriction policy, domestic iron ore demand will decrease by 33 million tons this year. However, considering that the iron ore supply side is relatively concentrated and its financial attributes are strong, it is expected that its price does not have the conditions for a sharp drop for the time being. In the long run, iron ore prices will show a resistive downward trend.