The post-holiday steel price forecast has sparked a lot of discussion among market participants. Before the holiday, domestic coating prices were on an upward trend, mainly driven by rising steel mill costs. However, despite this increase, market demand did not keep pace, leading to a challenging situation for businesses and manufacturers. Sales remained sluggish, with many buyers adopting a wait-and-see approach due to the uncertainty in pricing.
Looking at the current scenario, there hasn’t been a significant rise in downstream purchases before the holiday, and normal buying activity has remained steady. The ongoing price increases have created hesitation among buyers, who are cautious about making large commitments. In the short term, the support from downstream sectors is weak, while steel mills remain strong, leaving businesses caught in a difficult position.
Overall, the market still faces sales pressure, but inventory levels are manageable. However, the combination of low buyer confidence and high production costs continues to impact purchasing decisions. It is expected that major steel mills will maintain stable ex-factory prices after the holiday. Based on this, the post-holiday market is likely to continue its weak adjustment trend.
Let’s break it down further:
1. **Production Capacity Pressure and Market Adjustment**
In January–August 2013, the output of plating plates increased by 10.8% to 27.962 million tons, while coated plate output fell by 11.5% to 4.804 million tons. Meanwhile, exports of coated plates rose significantly, reaching 5.172 million tons, up 16.8% from the previous month. This indicates that while domestic demand for coated plates was affected, export performance improved, creating some pressure on the domestic market.
Although downstream manufacturing didn’t see a major decline in the first half of the year, the demand for engineering and construction projects dropped, affecting overall domestic consumption. On the other hand, export volumes rebounded after anti-dumping measures and domestic market pressures, which could create challenges in balancing domestic and international prices. As a result, the production pressure for coated plates is expected to remain high after the holiday.
2. **Long Process Costs and Private Producer Operating Rates**
Starting in June, steel mills began increasing prices for HRC products, leading to a steady decline in private producers' operating rates. Some companies saw their rates drop below 25%. The long process chain has started generating profits for upstream players, putting more pressure on downstream businesses.
Currently, the utilization rate for coated products is low, with galvanized output averaging around 80% nationwide, and color-coated production between 40–50%. With some plants shut down, utilization rates are expected to drop further. While coated product supply seems controlled and prices are positive, steel mills are also increasing risks for downstream companies, making it harder for them to compete.
3. **Market Sentiment During Price Adjustments**
Currently, market prices are at an intermediate level compared to the 2007–2012 period. Steel mill ex-factory prices have risen slightly, and the cost of SPHC raw materials for coated coils is estimated at around 3,550 yuan per ton, with total costs reaching 4,650 yuan per ton when sold. Some hot coil manufacturers are quoting prices near this level, but opinions on future price trends vary. Private factories believe that prices may still fall, while traders remain cautious.
Additionally, increased exports of coated plates to Southeast Asian countries have led to some dissatisfaction, raising the possibility of a new anti-dumping investigation in November. This could affect market expectations and lead to further adjustments in the coming months.
4. **Post-Holiday Market Expectations**
Historically, the market tends to open strongly after the Chinese New Year, pushing prices higher. However, this year shows no clear policy support, and funding conditions remain tight, leading to weaker overall expectations. Unlike previous years, where demand had already started to pick up, this time the market remains hesitant, with limited consumer activity.
Moreover, steel mill costs remain high, causing repeated price fluctuations without clear opportunities. Finally, the current financial environment is worse than in previous years, with less capital available for market operations, resulting in lower trading activity.
Taking all these factors into account, it is likely that post-holiday price adjustments will be weaker, but not excessive. This aligns with the current market conditions and buyer sentiment, making it a more realistic outlook for the near term.
NINGBO DOTEC is a solenoid armature manufacturer and exporter in China for many years.
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