Since reaching a high of 5,060 yuan/ton on April 7, the price of billet in Tangshan, Hebei has started to fluctuate with a single day of 10 yuan/ton to 20 yuan/ton. On May 6, the price of Tangshan General Carbon billet rose again to 5130 yuan/ton. Will Tangshan billet prices hit new highs in the later period? The author believes that the following analysis is needed.

Entering 2021, the Tangshan government "iron fist" restricts production, and it is expected that the local production will be reduced by nearly 50 million tons throughout the year. Since the introduction of the 30% to 50% production limit policy in Tangshan, Tangshan steel billet reversed its previous loss and the price broke through the 5,000 yuan/ton mark and fluctuated at a high level, achieving substantial profits. In the author's view, the high prices and high profits of Tangshan billet have a greater relationship with the local strict production restriction policy. Although the current pace of production restriction in Tangshan has not slowed down, the market has basically digested this heat. The author believes that there will be a new operating trend in the market in the later period, but the new operating trend still cannot bypass the production control, "double carbon" (carbon peak, carbon neutral) target, import and export policy adjustments and other aspects.

First, the management of steel production under the "dual carbon" goal is a big proposition. In order to achieve the "dual carbon" goal, the Ministry of Industry and Information Technology clearly proposed to reduce crude steel output earlier this year. The author believes that the future steel production management should implement dual restrictions on pollution emissions and carbon emissions on a market basis. Under the current smelting mode and technical conditions, the most immediate way to control the total amount of pollutants and carbon emissions is to control the output of steel. Tangshan's production limit is precisely under this background.

In the first quarter of this year, my country's crude steel, pig iron, and steel output reached 271.04 million tons, 220.9 million tons, and 329.4 million tons, respectively, up 15.6%, 8.0%, and 22.5% year-on-year. Among them, the output of crude steel, pig iron, and steel in March reached 94.02 million tons, 74.75 million tons, and 11.87 million tons, respectively, up 19.1%, 8.9%, and 20.9% year-on-year. In March, the average daily output of crude steel, pig iron, and steel reached 3.0329 million tons, 2.4113 million tons, and 3.866800 tons, respectively, an increase of 2.3%, a decrease of 1.7%, and an increase of 8.9% compared with the previous two months. On the whole, crude steel output continued to increase in the first quarter of this year. Judging from the month-on-month data, only pig iron output fell in March. However, considering the factors affecting the market due to the new crown pneumonia epidemic in the first quarter of last year, it is not surprising that steel production increased in the first quarter of this year.

Second, the downstream data is gratifying, but the cost pressure caused by high steel prices still exists. In the first quarter of this year, my country's GDP increased by 18.3% year-on-year, 0.6% compared with the fourth quarter of 2020, and 10.3% compared with the first quarter of 2019. Specifically, the national investment in fixed assets (excluding rural households) reached 9,599.4 billion yuan, a year-on-year increase of 25.6% and a month-on-month increase of 2.06%. In terms of sectors, in the first quarter, infrastructure investment increased by 29.7% year-on-year, manufacturing investment increased by 29.8% year-on-year, and real estate development investment increased by 25.6% year-on-year.

The downstream data is more gratifying, but the most eye-catching is still real estate investment. In the first quarter, the newly started area of housing in my country reached 361.63 million square meters, a year-on-year increase of 28.2%; the construction area reached 798.394 million square meters, a year-on-year increase of 11.2%. The growth rate of investment, start-up and construction in the real estate sector has clearly driven the demand for construction steel. In the author's opinion, the reason why the demand for construction steel has not yet formed is that the downstream has not anticipated the current sharp rise in steel prices. The author believes that taking into account the rigidity of the construction period, the demand may be shifted later in the later period, and the market is "rushing for work in the rainy season, not low in the off-season".

Third, the adjustment of steel import and export tariff policies has been implemented, and the domestic steel import and export pattern will usher in changes. In March, my country's steel exports increased by 16.5% year-on-year to 7.542 million tons, a record monthly export volume in the past four years; imported steel products were 1.322 million tons, an increase of 16.3% year-on-year. In the first three months, a total of 17.682 million tons of steel was exported, a year-on-year increase of 23.8%; the cumulative imported steel was 3.718 million tons, a year-on-year increase of 17.0%. In March, my country’s net steel exports were 6.22 million tons, a year-on-year increase of 16.5%. In the first three months, the total net steel exports increased significantly by 25.8% year-on-year to 13.964 million tons.

Affected by the expectation of canceling export tax rebates for steel products, there was a phenomenon of "grabbing exports" in the market in March and April, and it is expected that the export data in April will continue to grow. However, with the cancellation of export tax rebates for almost all steel products starting on May 1, subsequent changes in the import and export pattern of the domestic market will usher in changes.

On the whole, the logic of whether the current steel price can build a top is mainly on the supply side. Due to the uncertainty of the production control policy, the position of the steel price topping also changes with the changes in the production control policy.

This year is the first year of the "14th Five-Year Plan" and the first year of my country's "dual-carbon" initiative. There is a natural contradiction between supply and demand. However, resolving the contradiction between supply and demand cannot be accomplished overnight, and the downstream needs to bear the pain of high upstream prices for a certain period of time. This process is also a price balance and game process, which will force the demand for steel to shrink until it reaches a balance between carbon emissions and economic development.

On May 6, the Ministry of Industry and Information Technology issued a new version of the "Implementation Measures for Capacity Replacement in the Iron and Steel Industry", which came into effect on June 1. One leg that affects the market has already landed, and the other leg is the specific method for compressing crude steel output. It is expected that the launch time will not be later than the end of May. In my opinion, with the gradual implementation of relevant policies, the price of billet in Tangshan may reach its peak before mid-June.