Important news! China's steel prices will continue to rise in 2021, boosting the price of plastic extrusion machinery

Important news! China's steel prices will continue to rise in 2021, boosting the price of plastic extrusion machinery

After experiencing a sharp increase in mid-to-late December 2020, domestic steel prices began to fall in January this year, and the prices of various steel products fell by 200 yuan/ton to 600 yuan/ton. Although the current steel price has corrected somewhat, steel mills and steel traders are optimistic about the trend of steel prices after the Spring Festival and throughout the year. Currently, the steel market has basically entered a closed state, some steel mills have started the Spring Festival price lock mode, and the prices of steel products in some regional markets have shown signs of rebound. The steel price volatility is limited before the Spring Festival, and the steel market is expected to usher in a "good start" after the Spring Festival.

From the perspective of the supply side, the current operating rate of blast furnaces and electric furnaces across the country is showing a downward trend, and the supply of steel continues to decrease. From the demand side, the current steel market demand situation has not changed much compared with previous years, and has basically maintained a normal level.

Supply side: According to the carbon neutrality target proposed by the state, the steel industry must effectively control the crude steel output. The Ministry of Industry and Information Technology put forward the requirement of "resolutely compress crude steel output and ensure a year-on-year decline in crude steel output" at the 2020 work conference. In 2021, the country will implement a new capacity replacement method. The minimum replacement standard for the new capacity replacement method is adjusted to 1.25:1, and the highest standard is adjusted to 1.5:1. The purpose is to solve the current problem of excessive production growth. However, it should be noted that due to the commissioning of a large number of replacement capacity, the actual supply capacity of crude steel will exceed the original eliminated capacity.

Affected by the epidemic in 2020, China's steel market demand and prices are at a relatively high level, and foreign steel imports have increased significantly. According to customs statistics, my country imported 20.23 million tons of steel in 2020, an increase of 64.4% year-on-year, and the average import price was US$831.6/ton, a year-on-year decrease of 27.5%. From the analysis of varieties, the structure of steel imports has undergone significant changes, and imports of ordinary steel have increased significantly, lowering the average import price of steel.

Steel prices still have room for upside in 2021. If steel profits improve, it is difficult for steel mills to actively reduce operating rates. It is expected that the domestic steel supply in the first half of the year will remain at a high level, and may decline in the second half of the year under the influence of policies and profits.

Demand side: The Spring Festival this year is relatively special compared to previous years. During the Spring Festival in previous years, many downstream companies stopped work since they were young, and employees went home one after another. Some companies did not resume production until after the Lantern Festival. However, affected by the epidemic this year, all localities advocated for employees to "Celebrate the New Year on the spot." Downstream companies may still have a certain amount of production during the Spring Festival. It is not ruled out that steel demand will recover earlier than usual after the Spring Festival. Although the social stock of steel has increased recently, the mentality of market participants is generally relatively stable.

In 2021, my country's economy and investment will continue to maintain a relatively high growth rate, especially the equipment manufacturing industry or a significant increase due to the influence of global manufacturing restocking, which will drive the growth of demand for steel products and other products. In addition, the demand for steel in construction, machinery, automobiles, energy, home appliances, railways, containers, hardware products, steel-wood furniture and other industries will all increase slightly. In 2021, my country’s total steel demand will increase slightly, but the demand growth rate may be A more obvious decline.

Under the influence of a series of policies to promote investment and stabilize growth, such as the country’s proactive fiscal policy and prudent monetary policy, the construction of the “two new and one heavy” fields has been vigorous, and the consumption of steel in major downstream industries such as construction, machinery, and energy in my country has maintained a good growth trend. , Drove the rapid growth of my country's overall steel consumption.

Domestic steel exports may increase significantly in 2021. In addition, steel demand driven by exports may also contribute to a larger demand. It is expected that my country's export market may achieve double-digit growth in 2021.

From the perspective of the global economic environment, the 2020 epidemic has severely affected the development of the global economy, and most of the world's major economies have experienced negative economic growth. Entering 2021, the global economic environment has changed. As countries continue to vaccinate, the impact of the epidemic will gradually decrease. After a long period of downturn, the world’s major economies have an urgent need to restore the economy, which will form a better expectation for global steel demand. From a domestic perspective, in 2020, my country's epidemic prevention and control has achieved world-renowned results, realizing a quarterly rebound in the domestic economy and achieving positive economic growth throughout the year. This has laid a good foundation for domestic economic development this year. Coupled with the country's vigorous efforts to build a new development pattern, new changes will occur in the focus of domestic economic development, which will have a new pulling effect on the steel market.

Under the influence of factors such as the room for growth in domestic demand and the gradual recovery of foreign demand, the fundamentals of the steel market will continue to improve this year. In the short term, although steel prices are currently falling, steel companies are generally optimistic about the market outlook, superimposed on the high prices of raw materials and fuels, and the support of steel production costs makes steel mills more willing to support prices, and the probability of steel prices rising later is greater. In 2021, the focus of steel prices may increase. From the perspective of trends, there is still a high probability that the upward trend since the second quarter of 2020 will continue in the first half of the year, and the impact of monetary policy shifts and new capacity will gradually decrease in the second half of the year.

How will steel market participants operate in 2021? Steel companies and downstream steel companies must operate in accordance with normal market operation laws. Steel companies must optimize the balance of production and sales based on their product structure, sales capabilities, equipment conditions, and warehousing and logistics conditions. Downstream steel companies must combine their actual production and business operations. It needs to be purchased and properly prepared.

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