Why did steel prices fall? Will steel prices rise in February?

In the first working week after the Spring Festival holiday, the price of black bulk commodity futures rose and fell back, and closed a negative line for four consecutive trading days. Among them, the main contract price of coking coal and coke futures fell the largest weekly, reaching 4.33% and 4.2% respectively. The main contract price of rebar and hot coil futures fell 2.9% and 2.8% respectively. Iron ore futures remained as strong as ever, with the main contract price falling only 0.35% weekly.

Since the resumption of construction sites and some manufacturing factories will be postponed to the 15th day of the first month, the domestic steel spot market has a small volume of trading, and it is in a state of price and no market in the week. The spot price fluctuates with the futures price and the Tangshan steel billet factory price, and decreases slightly.

First of all, let's analyze why the domestic steel futures prices fell significantly last week? In fact, as long as you know the truth that rising is bound to fall, it is easy to understand. Since the steel price rebounded from the bottom in November 2022, the price of rebar and hot coil futures has risen by about 900 yuan/ton, which has been very large. It is normal to make adjustments after the Spring Festival.

In addition, the prices of coking coal and coke were greatly affected by the resumption of China's import of coking coal from Australia and the sharp increase in the customs clearance of coking coal from Mongolia. It also contributed to the decline of steel futures prices.

Since January 2023, the spot price of iron ore has increased significantly, while the price of coke is still at a high level, resulting in an increase in steel production costs. According to statistics, the spot price of iron ore has risen by more than 120 yuan/ton, the production cost of steel has risen by about 70 yuan/ton, and the steel factory has passively raised the ex-factory price. Last week, the ex-factory price of Shagang was increased by 150 yuan - 300 yuan/ton in the first ten days of February, which is also a last resort.

At present, although the steel plant inventory is in the accumulation stage, most electric furnace steelmaking plants have not resumed production, and the overall inventory level is not high. According to statistics, the steel inventory is at a lower level in the same period of the past five years; Another factor is that steel traders are not enthusiastic about winter storage before the Spring Festival. They did not carry out large-scale winter storage. The social stock of steel is also at a low level, and the stock pressure in the steel market is not high.

According to the analysis of the area and amount of land purchased by real estate enterprises in the third quarter of last year, it is difficult to change the downturn of the new construction area of real estate in the first quarter of this year, and the demand for real estate steel can't be expected. Most of the increase in steel demand should come from the infrastructure and manufacturing industries. It is estimated that the demand for steel in the first quarter is basically the same as that in the same period last year.

The above analysis of the steel production cost, steel inventory and demand status. In general, the steel price in February will maintain a weak balance. The fall is supported by cost, and the rise is also suppressed by demand. The check and balance factor is steel raw materials. The rise and fall of steel raw material prices will affect the rise or fall of steel prices.

It is worth noting that since last week, Singapore's iron ore swap index has declined, and the price of outer iron ore has dropped from 129 US dollars/ton to 121 US dollars/ton this morning. Whether it will have a substantial impact on domestic iron ore futures and spot remains to be seen.