As the winter approaches in the northern regions, we are seeing a dip in demand, which is typical for this time of year. Steel mills are restarting their operations, but costs continue to provide support. The long products market remains influenced by seasonal trends, while the sheet metal sector is slowly stabilizing its manufacturing environment. Fortunately, short-term projections indicate that the domestic steel market might experience mild fluctuations, with stronger performance expected in plates compared to long products.
According to the Lange Steel Information Research Center's weekly price forecasting model, domestic steel market prices are anticipated to rise slightly this week (November 12-16). Long products may see a minor decline, while the plate market should remain steady with slight gains. The Lange Steel Composite Index is expected to hover around 150.2 points, with an average steel price of approximately 3900 yuan, fluctuating within a range of 20-30 yuan. The Lange Steel Long Products Index is projected to stay around 165.4 points, with a drop of roughly 0.6 points; the Lange Steel Plate Index is forecasted to hover near 131.0 points, with an increase of around 1.2 points.
Based on the market survey conducted by the Lange Steel Information Research Center, domestic long products market prices are expected to decline slightly this week (November 12-16), while plate market prices should remain relatively stable with a slight upward trend. Raw material prices could vary. Prices for iron ore and billets are likely to remain stable, while coke market prices may increase by 30-50 yuan, and scrap steel prices are expected to drop steadily by around 100 yuan.
In the 45th week of 2012 (November 5-9), the Lange Steel (LGMI) Composite Price Index reached 149.6 points, marking a week-on-week increase of 0.72%, yet a decrease of 13.20% compared to the same period last year. The LGMI Long Products Price Index was 166.0 points, increasing slightly by 0.03% from the previous week, but still down by 15.31% year-over-year. Meanwhile, the LGMI Sheet Price Index stood at 129.8 points, rising by 1.80% week-on-week, though it dropped by 9.75% compared to the same period last year.
Data from the market monitoring of 44 standard varieties across 17 categories by the Lange Steel Information Research Center revealed slight fluctuations in major steel product prices during the 45th week (November 5-9) of 2012. Flat products showed a slight increase, while falling varieties slightly outnumbered those that increased. Out of 44 varieties, 17 rose, four fell compared to the previous week; 14 remained unchanged, one more than the prior week; and 13 fell, three more than the previous week. Domestic iron and steel raw materials experienced mixed price movements, with iron ore and scrap markets remaining stable, coke prices rising by 70-150 yuan, and billet prices dropping by 10-30 yuan.
This week, the national steel stock market slowed its decline somewhat. Nationwide steel inventories have been consistently falling. The decline in building materials inventory has slowed slightly, while the rate of decline in sheet stocks has quickened. According to market monitoring by the Lange Steel Information Research Center, as of November 9th, the total steel social stocks in 29 key cities nationwide were 12,279,500 tons, down 217,900 tons from the previous week. By sub-category, wire rod social inventories stood at 1,004,300 tons, down 2.29% from the previous week; rebar social inventories were 4,522,300 tons, up 0.12% week-on-week; panluo social inventory was 264,500 tons, dropping 6.04% compared to the previous week; hot-rolled coil social volume was 3,454,800 tons, down 3.95% from the previous week; cold-rolled coil social volume was 1,585,900 tons, down 0.72% week-on-week; and plate social inventories were 1,447,800 tons, down 1.89% from the previous week.
This week, the steel market fluctuated narrowly. During the 45th week of 2012 (November 5-9), rebar and ferrous alloy markets saw narrow-range oscillations, with the market sentiment becoming increasingly cautious. The settlement price for this week fell by 36 points, but in reality, the settlement price only dropped by 5 points compared to last week, staying within a tight price range. This week, the main contract volume was 1.07 million contracts, an increase of 123,000 contracts. The 1305 contract continued to expand for the second consecutive week, indicating growing interest in rebar futures, and also hinting at potential mid-level pricing.
Macroeconomic concerns affecting steel prices include:
In October, the non-manufacturing PMI increased by 1.8 percentage points. On November 3, the National Bureau of Statistics Service Survey Center and the China Federation of Logistics and Purchasing released the October 2012 non-manufacturing business activity index in China. Data shows that in October, the Non-Manufacturing PMI was 55.5%, up 1.8 percentage points from the previous month. New orders and employment indices remained stable, while the business activity expectations index significantly increased to 63.4%. These changes suggest a positive trend in non-manufacturing sectors with accelerating growth rates.
In October, the overall consumer price level rose by 1.7% year-on-year. The national consumer price level increased by 1.7% year-over-year, with urban areas rising 1.8% and rural areas rising 1.5%. Food prices climbed by 1.8%, and non-food prices increased by 1.7%. Consumer goods prices rose by 1.5%, while service prices increased by 2.3%. From January to October, the national consumer price level rose by 2.7% year-on-year. In October, the national consumer price level fell by 0.1% month-on-month, with both urban and rural areas experiencing similar drops. Food prices fell by 0.8%, while non-food prices rose by 0.3%. Consumer goods prices fell by 0.2%, and service item prices increased by 0.2%.
In October, the national industrial producer’s factory price fell by 2.8% year-on-year. Industrial producer prices nationwide fell by 2.8% year-on-year and 0.2% month-on-month. Industrial producer purchase prices decreased by 3.3% year-on-year and rose by 0.1% month-on-month. From January to October, industrial producer ex-factory prices fell by 1.6% year-on-year, and purchase prices fell by 1.7% year-on-year. Among producer prices, means of production prices fell by 3.7% year-on-year, with extractive industries falling by 6.4%, raw materials industries by 3.4%, and processing industries by 3.5%. Living materials prices rose by 0.2% year-on-year, with food prices rising by 0.3%, clothing by 1.6%, general commodities by 0.5%, and durable consumer goods falling by 1.0%. Among purchase prices, ferrous materials fell by 11.4% year-on-year, chemical raw materials by 5.7%, non-ferrous metals and wires by 3.1%, textile raw materials by 2.2%, and fuel power by 1.5%.
National fixed asset investment increased by 20.7% from January to October. From January to October, national fixed asset investment (excluding rural households) reached 292,542 billion yuan, growing 20.7% year-on-year, an increase of 0.2 percentage points compared to the first nine months. Month-on-month, fixed asset investment (excluding rural households) increased by 1.94% in October.
By sub-sector, from January to October, the primary industry invested 743.7 billion yuan, growing 32.3% year-on-year, up 0.1 percentage points from the first nine months; the secondary industry invested 1287.5 billion yuan, growing 21.9%, down 0.5 percentage points from the first nine months; the tertiary industry invested 156,319 billion yuan, growing 20.1%, up 0.7 percentage points from the first nine months. Within the secondary industry, industrial investment was 1,258.3 billion yuan, growing 21.9%, down 0.6 percentage points from January to September. Among these, mining industry investment was 1005.7 billion yuan, growing 14.7%, down 2.7 percentage points; manufacturing investment was 1018.8 billion yuan, growing 23.1%, down 0.4 percentage points; electricity, heat, gas, and water production and supply industry investment was 13437 billion yuan, growing 18.6%, down 0.5 percentage points.
In October, the industrial added value above designated size increased by 9.6% year-on-year. Industrial enterprises above designated size reported a 9.6% year-on-year increase in added value in October, 0.4 percentage points faster than in September. Month-on-month, the added value of industries above designated size increased by 0.81% in October. From January to October, the industrial added value of above-scale industries increased by 10.0% year-on-year.
By sub-sector, in October, the added value of 41 major industrial sectors all increased year-on-year. Among them, the textile industry grew by 11.9%, chemical raw materials and chemical products manufacturing by 11.9%, non-metallic mineral products industry by 11.0%, ferrous metal smelting and rolling processing industry by 12.6%, general equipment manufacturing by 7.1%, automobile manufacturing by 5.9%, railways, ships, aerospace, and other transportation equipment manufacturing by 6.1%, electrical machinery and equipment manufacturing by 7.9%, computer, communication, and other electronic equipment manufacturing by 10.1%, and electricity and heat production and supply by 4.7%.
Industry News:
Shandong Province plans to consolidate its steel industry into six major corporations by 2015. As a pilot region for structural adjustments in the steel industry, Shandong will undergo a major consolidation of steel companies. By 2015, the number of steel enterprises will be reduced from 21 to six major steel groups, with total steel production capacity adjusted from 63.07 million tons to 50 million tons, and coastal steel production increasing to 43%. The merger and reorganization of enterprises form a critical part of Shandong's steel structure adjustment pilot program. On November 1st, the "Shandong Iron & Steel (Group) Co., Ltd. Merger and Reorganization Plan" was announced. Besides the core Shandong Steel Group, five regional steel enterprise groups will also be established in Zibo, Weifang, Laiwu, Linyi, and Binzhou.
Crude steel production fell by 5.4% in the last quarter of October. According to the China Iron and Steel Association, the average daily output of crude steel for major and medium-sized enterprises in late October was 15.195 million tons, a decrease of 86,600 tons from the previous month and a 5.4% drop from the previous month. In the second half of October, the country's crude steel production was estimated at 21.183 million tons, with an average daily output of 1.926 million tons, a decrease of 73,000 tons from the mid-term and a 3.7% decrease from the previous month. The monthly average daily output of crude steel in October was 1.658 million tons, an increase of 1.4% from September.
The Ministry of Commerce decided to impose anti-dumping duties on imports of certain high-performance stainless steel seamless pipes from the European Union and Japan. On November 8, the Ministry of Commerce issued Bulletin No. 72 of 2012, announcing the final results of the anti-dumping investigation into high-performance stainless steel seamless pipes. Starting November 9, 2012, anti-dumping duties ranging from 9.2% to 14.4% will be imposed on imports of these products from the EU and Japan for a period of five years. After investigation, the investigating authority determined that dumping occurred during the investigation period, causing substantial damage to the relevant high-performance stainless steel seamless steel pipe industry in China, with a causal relationship between dumping and damage. Therefore, the Ministry of Commerce decided to impose anti-dumping duties on these products originating from the EU and Japan starting November 9, 2012. The Ministry of Commerce launched an anti-dumping investigation into these products on September 8, 2011, and issued a preliminary ruling on May 8, 2012, confirming dumping in the investigated products.
The thread closed up on the main contract rose by 0.52%. The rebar main 1305 contract opened at 3,640 yuan/ton in the morning on the 9th, showing an intraday volatile downtrend throughout the day. The lowest price of the day was 3,628 yuan/ton, and the highest was 3,673 yuan/ton, closing at 3,640 yuan/ton. On the previous trading day (8th), the settlement price increased by 19 yuan/ton, with a trading volume of 2,328,602 lots, and open interest amounted to 1,070,130 contracts, an increase of 10,862 contracts.
Downstream Demand:
Fixed asset investment in railways decreased by 0.9% month-on-month in October. According to statistics from the Ministry of Railways, national railway fixed asset investment from January to October was 425.169 billion yuan, a year-on-year decrease of 0.9%. Among these, national railway infrastructure investment reached 361.816 billion yuan, a year-on-year decrease of 1.5%.
According to statistics from the Ministry of Housing and Urban Development, from January to October, a total of 7.22 million units of newly-built urban housing security projects were completed, with approximately 505 million units finished, and an investment of 1,080 billion yuan was completed. The plan is for more than 7 million units of urban housing projects to be newly built this year, with approximately 5 million units expected to be completed.
From January to October, national sales of home appliances to rural areas exceeded 60 million units. According to statistics from the Ministry of Commerce, from January to October, 65.22 million units of home appliances were sold nationwide (excluding Shandong, Henan, Sichuan, and Qingdao), achieving sales of 175.24 billion yuan, representing increases of 23.5% and 18.8% year-on-year, respectively. In October alone, the country sold 7.91 million home appliances to rural areas, achieving sales of 21.38 billion yuan, a year-on-year increase of 27.5% and 26.0%. As of the end of October 2012, the country had sold 283 million home appliances to rural areas, achieving sales of 681.1 billion yuan.
Real estate development investment increased by 15.4% from January to October. According to data from the National Bureau of Statistics, from January to October, the total investment in real estate development nationwide reached 5,769,900 million yuan, a year-on-year increase of 15.4%, the same as the growth rate from January to September. Among these, residential investment was 3,974.0 billion yuan, an increase of 10.8%, with the growth rate increasing by 0.3 percentage points, accounting for 68.9% of total real estate development investment.
From January to October, the construction area of real estate development enterprises was 538.149 million square meters, a year-on-year increase of 13.3%, with the growth rate decreasing by 0.7 percentage points from the first nine months. Among these, the residential construction area was 403.203 million square meters, an increase of 10.9%. The new housing start area was 1,476.92 million square meters, down by 8.5%, with the decline narrowing by 0.1 percentage points from January to September. Among these, the newly started residential area was 1,0839.96 million square meters, down by 12.7%. The completed building area was 58.317 million square meters, an increase of 17.3%, with the growth rate increasing by 0.9%. Among these, the completed residential building area was 476.92 million square meters, an increase of 17.1%.
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