Since October, China's steel prices have shown a trend of high and low. In the early period of October, the prices of most varieties of steel fluctuated upwards; in late October, except for the rebar, the supply gap continued to rise, and the prices of other varieties went out of the downward trend under the constraints of poor downstream demand. After November, almost all varieties of steel prices turned downwards, driven by the steep drop in thread prices. In early November alone, the spot price of rebar fell by nearly 6%.

The steel association steel price index shows that after September this year, China's steel price composite index has shown a significant flattening or downward trend, and the trend of the long product index, sheet index and composite index has increased significantly. The strength of the long product index is not unrelated to the supervision of the supply-side structural reforms in recent years and the continuous “clean-up prevention” after the “cleaning of the strip”. The tight supply and demand balance and the relative strength of the real estate and infrastructure industries are relatively strong. The support made the long products represented by rebar become the “pillar” to support the high price operation of the Chinese steel market.

At the same time, according to the average price of rebar and hot rolled coils given by the Steel Association in October, the “rolling screw difference” continues to expand, and the profit margin between hot rolled coil and rebar is increasing. This unreasonable phenomenon shows that: 

First, the downstream demand for various steel products varies greatly; 

second, the high price of rebar is difficult to sustain; 

third, the downward trend of rebar prices may drive the steel price in the aftermarket to fluctuate downward. 

Only the overall and stable downstream demand can support the continuous development of China's steel industry.

Although steel prices have declined since October, the overall profit of China's steel industry remained at a high level from January to October.

From the curve of the cost composition and gross profit change of steel per ton since 2015, the supply side structural reform, severely cracking down on “strip steel” and clearing the intermediate frequency furnace and continuing to prevent its “resurrection”, coupled with the Chinese government’s continuous strengthening of environmental governance The supply side of China's steel industry has been well controlled, effectively balancing the supply and demand relationship in the domestic steel market. The profitability of steel companies has been continuously improved, and the gross profit per ton of steel has fluctuated upward. According to the National Bureau of Statistics, from January to September 2018, the profit of ferrous metal smelting and rolling processing industry was 313.16 billion yuan, a year-on-year increase of 71.1%. The rise in the level of disposable gross profit of enterprises has played a key role in improving the overall profit rate of the industry, reducing the debt burden of enterprises and reducing the financial leverage of enterprises. At the same time, the increase in the gross profit level of the steel industry is conducive to the improvement and improvement of the technical level of iron and steel enterprises. At the same time, it raises the level of equipment in environmental protection and energy conservation, and advances into high-quality development.

From the statistics of China's Nissan crude steel since 2017, China's crude steel output fluctuated upwards; in October, China's pig iron production was 67.74 million tons, and crude steel output was 82.55 million tons. The cumulative output of the two months from January to October was 645 million tons and 782 million tons. According to this estimate, the annual crude steel output in 2018 may reach a record high of 940 million tons. The pressure on the supply side is increasing. In the winter of 2018, the second heating season no longer has a “one size fits all” limit for production, which is the first market test for the Chinese steel industry to face initial results in the supply-side structural reform. What is currently emerging is the self-discipline of enterprises and the weak self-control ability of the overall supply and demand of the market. In November, the sudden drop in steel spot and futures prices further indicates that the current overall structure of the steel industry is still not solid, and there is still a long way to go before the overall development of the Chinese steel industry.

In 2019, global geopolitics is still unstable. The impact of Sino-US trade wars has exceeded expectations and will continue for a long time. China's overall economy is at an important stage of transformation and development, economic growth is slowing down, and the RMB exchange rate is declining. Factors will have different degrees of impact on the future operation of the steel market. The Chinese steel industry will continue to move along the path of high quality development for a long time to come. In the context of continued heavy pressure on environmental protection and relatively reduced profits, a new round of industry strategic restructuring aimed at avoiding homogeneous competition, expanding market share and increasing market concentration will begin.

Due to the lack of continuous support for the steel market in the downstream market, the demand is declining, the market pessimism is strong, and the transaction is cautious, which will cause steel prices to continue to fluctuate downward. It is expected that steel prices will not rise sharply in the short term, and even if there is a rebound, the magnitude should not be expected to be too high.