The cost dropped slightly, short-term steel prices or weak consolidation

Last week, domestic steel production costs fell within a narrow range. According to the calculation model of Fubao Information, as of October 19, the production cost of major steel products in China fell by RMB 10-11/ton from the previous Friday, with a drop of 0.26%-0.31%.

From the factors that affect the cost of steel production:

1. Raw material market: Last week, the enthusiasm for purchasing of steel plants was poor, raw material market inquiries decreased, wait-and-see atmosphere increased, overall turnover was unsatisfactory, and the price remained stable and narrowed within a narrow range. Among them, the narrow range of domestic mines, its average price rose slightly by 7 yuan/ton on a week-to-week basis; import mines oscillated downward, its average price fell by 12 yuan/ton on a week-on-week basis; billets and scrap were consolidated; coal char narrowed in part.

2. Shipping market: Last week, BCI index rose sharply, and BPI index rose slightly, driven by the supplement of raw materials such as iron ore and grain exports from the Americas, driving the BDI composite index to rebound sharply to 1010. The freight rates of Brazil, Western Australia and China Capesize have been significantly increased, and the freight rates from India to China Panamax have remained stable. The shipping market has been driven by seasonal factors this month, but the growth has slowed down. As the contradiction between supply and demand imbalances in the transport capacity remains unresolved, the possibility of the short-term shipping market weakening again is still greater.

Last week, the social inventories of various steel varieties continued to decline, but the effective demand was still little showing up. The price adjustments of steel mills were mixed, and the market’s views on the market outlook were different. Traders’ purchases were cautious, and some pessimistic atmospheres increased, due to the overhaul of steel mills. The reduction in production is still limited, and if the production capacity is released in the later period, the potential for further conflict between supply and demand will increase. In addition, the cost of steel production has declined slightly, and the cost support for steel prices has weakened again. In general, short-term steel prices are expected to operate in a narrow range.