China’s steel market has had a solid start to the year. Statistics show that in the first two months of this year, the national steel market demand increased steadily, while supply and demand significantly reduced, social inventory decline. Because of the improvement of supply and demand relations and the increase in costs, the price shocks to the upside.

First, the downstream steel industry growth accelerated, steel demand increased steadily

Since the fourth quarter of last year, policy makers have introduced a series of measures to stabilize growth, such as accelerating the approval of investment projects, reducing the reserve requirement ratio, cutting interest rates in some areas, and advancing the issuance of local bonds. Under the influence of these measures, national fixed asset investment, industrial production and steel consumption products have accelerated, and exports have exceeded expectations. According to statistics, in the first two months of this year, national fixed asset investment (excluding rural households) increased by 12.2% year on year, and industrial added value above designated size increased by 7.5% year on year, both showing a rapid growth trend, and the speed is still accelerating. Among some important steel-consuming products, the output of metal-cutting machine tools increased by 7.2% year-on-year in January-February, that of generator sets by 9.2%, that of automobiles by 11.1% and that of industrial robots by 29.6% year-on-year. Thus, this year since the national steel domestic demand growth trend is stable. At the same time, the total value of national export increased by 13.6% year on year, achieving a double-digit growth trend, especially the export of mechanical and electrical products increased by 9.9% year on year, steel indirect export is still vigorous.

Second, both domestic output and imports have declined, further reducing the supply of resources

At the same time of the steady growth of the demand side, the supply of new steel resources in China has declined significantly. According to statistics, in the first two months of this year, the national crude steel output of 157.96 million tons, down 10% year on year; Steel output reached 196.71 million tons, down 6.0% year on year. In the same period, China imported 2.207 million tons of steel, down 7.9% year on year. According to this calculation, the increase of crude steel resources in China from January to February 2022 is about 160.28 million tons, down 10% year-on-year, or nearly 18 million tons. Such a large reduction is unprecedented in history.

Third, the obvious improvement of supply and demand and cost increase, steel price shock up

Since this year, the steady growth of demand and the relatively large decline in new resources, so that the supply and demand relationship has been significantly improved, thus promoting the decline of steel inventory. According to China Iron and Steel Association statistics, in the first ten days of March this year, the national key statistics of steel enterprises steel inventory fell 6.7% year on year. In addition, according to Lange Steel network market monitoring, as of March 11, 2022, the national 29 key cities steel social inventory of 16.286 million tons, down 17% year on year.

On the other hand, since this year iron ore, coke, energy and other price rises, also makes the national steel production costs have increased. Lange Steel Network market monitoring data shows that as of March 11, 2022, iron and steel enterprises pig iron cost index of 155, compared with the end of last year (December 31, 2021) increased by 17.7%, steel price cost support continues to strengthen.

As a result of the above two aspects of the promotion, coupled with global inflation background, so this year since the national steel price shock up. Lange Steel Network market monitoring data shows that as of March 15, 2022, the national average steel price of 5212 yuan/ton, compared with the end of last year (December 31, 2021) up 3.6%.