Since entering January, the price of section steel has been on a steep downward slide, leaving many in the market puzzled. The expected rebound during the month seems to have vanished like a bubble, raising concerns about the future direction of profiled steel prices. What will happen next? Can the market turn around? And what should steel traders do in this uncertain environment?
Raw material billets continue to struggle, with prices falling sharply since mid-December. Although there was hope for a strong start in January, the market has continued to disappoint. From 3,040 yuan/ton on December 30 to 2,820 yuan/ton now, that's a total drop of 220 yuan, with a single-month decline of 160 yuan. Compared to 3,280 yuan/ton in the same period last year, the decline is even more severe, reminiscent of the 2008 market crash. As of January 23, the mainstream stockpiles of Tangshan billets reached 666,000 tons, with 187,000 tons added in January. In 2013, the storage volume was between 431,000 and 104 million tons, with 610,000 tons added. The rolling line operation rate in billet mills is currently around 20-30%, hitting a low point.
Despite lower inventory levels compared to previous years, steel prices remain under pressure. Why? First, downstream mill purchase volumes have dropped from about 20 days to just 10 days, with a focus on immediate use. Previously, steel mills held 5,000–13,000 tons, enough for 3–4 days. Meanwhile, finished product prices are also falling due to weak demand. Steel mills are adopting aggressive strategies, such as selling at low prices to reduce inventory. Second, capital constraints are still tight, especially for large steel mills and major customers. This limits purchasing activity. Third, psychological factors are at play—many are still wary after losses from the same time last year, leading to cautious behavior.
In February, billet prices may see a slight rebound, but it’s unlikely to be significant. The downstream operating rate remains low, and purchases are limited. The current operating range for Tangshan billets is between 2,830–2,870 yuan/ton.
For steel traders, the outlook remains challenging. Prices in January 2014 were significantly lower than the same period last year. Last year saw a steady upward trend, but this year, the market has failed to recover, creating uncertainty ahead of the Chinese New Year. Merchants are increasingly worried. For example, Tangshan 5-angle steel fell from 3,260 yuan on the 1st to 3,140 yuan now, a drop of 120 yuan, while last year it rose by 130 yuan. Similar declines are seen in other regions, like Dongshan 10–14 slots, which fell 180 yuan, and Wushao 5-angle, down 100 yuan.
Currently, only small steel plants that cannot produce billets are shut down, while larger plants continue operations during the Spring Festival. According to Zhuochuang Information, factory inventories could increase by 10,000–15,000 tons during the holiday, while smaller factories maintain inventory at 7,000–16,000 tons, which is relatively normal.
The difficulty in price recovery stems from two main factors: first, although inventory levels are stable, downstream demand hasn’t picked up yet, and purchasing activity remains weak. Second, funding constraints persist, with banks maintaining strict control over the steel industry. This could lead to merchants initiating sales to free up cash.
In conclusion, while the long-term trend may eventually see a rebound, it’s likely to occur in late February or early March, with an initial increase of 50–100 yuan. As downstream industries gradually resume operations, both purchase volume and prices may rise. However, steel mills and traders remain cautious, hoping for stronger market sentiment. As the saying goes, "After a long decline, a rise is inevitable," but the market continues to fluctuate. Post-holiday "Jin San Yin Si" (the third and fourth months of the lunar calendar) often brings some recovery, but according to Zhuo Chuang Information, the market won’t show significant improvement before the 15th of the lunar month. Merchants are advised to remain cautious in buying and selling, keep a calm mindset, and pay close attention to macroeconomic policies following the holiday.
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