Analysis of the raw material market of steel November 8, 2021

【Imported Mine】
Imported mines this week, the imported mines market dropped sharply and then fluctuated. The overall price center continued to move downwards. As of November 4, the China United Steel spot price index, the CSI index, closed at 96%. USD/ton, down 10.2 USD/dry ton from last week; CSI 62% port spot imported fine ore index closed at 720 yuan/ton, down 73 yuan/ton from last week. Specifically, this week, the state has continued to ensure the supply and stability of coal prices, and the entire black system has been under pressure, and ocean freight prices have also continued to fall recently. The cost support for mine prices has further declined, and the demand for steel continues to be weak. As the heating season restricts production further, and superimposed on the recent narrowing of steel mill profits, some steel mills have suffered losses. Due to the shortage of sinter ore, the demand for iron ore in the blast furnace has further weakened; Futures fell sharply, and the entire black system continued to bear bad news. At the beginning of the week, iron ore futures showed a downward limit trend, closing at 565.5 yuan/ton on the 2nd. The big players in the market have been selling, and the market’s pessimism and panic have intensified. Market liquidity is poor, and spot transactions are relatively small; Shandong PB powder fell by 50-60 yuan/ton, and the lowest transaction was 690 yuan/ton, which was the lowest point in the year. The market’s lowest price for ultra-special powder was 350 yuan/ton. , Some traders have the behavior of low price to take the super special bargaining. The U.S. dollar price also saw a drop of nearly 7 U.S. dollars, falling below 100 U.S. dollars to around 96 U.S. dollars. With the sharp drop in prices, some of the iron ore futures took profits and left the market with some short orders. The disk rebounded slightly. However, due to the slight relief of the pressure on the port and the poor demand, the port inventory continued to accumulate. Still pessimistic, the rebound is unsustainable. Market bearish sentiment is still strong, the iron ore market has weak liquidity, price fluctuations are weak, and the downstream demand for superimposed steel continues to be weak. The profit loss of steel mills constitutes the biggest negative factor for iron ore. With the advent of the advent, air pollution prevention and control measures will be implemented frequently, and production-limiting policies in the heating season will be introduced one after another, which will further curb demand; in addition, as the weather turns cold, downstream steel demand may continue to be poor, and steel price support will weaken. The price of ore will also be restrained. In addition, the current profit of steel mills is declining, and steel mills may adjust their purchases in consideration of costs, and high-grade ore may be under pressure; the market game will continue in the later stage, and under the environment of limited production, imports The mining market may still be weaker to adjust.

【Coke】
This week, the coke spot market declined weakly, and the first round of price cuts basically landed. After the drop, the mainstream of quasi-level wet quenching in Shanxi was 3860-3960 yuan/ton. At the beginning of the week, under the influence of the sharp drop in steel prices and the intensified production restrictions, steel mills put forward a price reduction appeal. Steel mills continue to implement maintenance and production restrictions, and rigid demand for coke has weakened; coke inventories in steel mills have rebounded slightly, and purchase enthusiasm is not high; and there are still expectations of stricter production restrictions in the later period, and steel prices have fallen weakly, and price reduction psychology has gradually become apparent. Due to the impact of weather pollution and environmental protection, the production of coke companies in the main producing areas still maintains production limits, and the coke supply has not been significantly released. Affected by the slowdown in the purchase of steel mills, some coking companies have overstocked inventory; superimposed coking coal has fallen, coke costs have decreased, and coking companies have a pessimistic mentality and cut prices to actively deliver goods. The port spot price fell and the market outlook was still bearish, and the selling psychology of traders was obvious. On the whole, the overall supply and demand of coke are both weak, and the demand is significantly reduced. Steel mills are expected to reduce prices and increase, and coke may still fall in the later period. Continue to pay attention to the impact of steel mills’ production restrictions, raw coal price trends, and coke supply and demand on the coke market. On the supply side, weather pollution and environmental protection policies may continue. The main production areas of Shanxi, Hebei and other places will continue to limit production, and the increase in supply will not be obvious. Production restrictions and production cuts in steel mills have intensified, and rigid demand for coke has weakened; some steel plants have controlled the arrival; coke inventories have rebounded and more purchases are made on demand; steel prices have fallen, steel mill profits have decreased, and continued price cuts are expected to increase. In terms of cost: the weakness of coking coal blending has fallen, the cost of coke has decreased, and cost support has weakened. Next week, the coke supply and demand pattern will remain at the previous level, steel mills will reduce production and increase, and demand will weaken. There is a slight backlog of coke companies’ inventory, and the cost support of coking coal prices has weakened. At the same time, steel prices have fallen and steel mills are willing to cut prices. There is still a possibility that coke will continue to fall. Continue to pay attention to the production restrictions of steel mills and coking enterprises and the trend of coking coal prices.

【Coking coal】
This week, the domestic coking coal market was operating under weak pressure. The coal production in the main producing areas has increased, the coking coal market supply has improved, the downstream coking plants and steel mills have reduced the purchase demand, the shipment pressure of individual coal mines has increased, the inventory of some coal types has accumulated slightly, and the price of some coal types is expected to increase. Shanxi Anze’s low-sulfur main coking coal is reduced by RMB 150/ton to 3,900 yuan/ton, and the thin main coking coal in Changzhi area is reduced by RMB 200 to 3550/ton. Wuhai high-ash and low-sulfur clean coal is reduced by 100 yuan to 3,000 yuan/ton. The first round of price cuts for coke landed, and the profits of coke companies shrank, mainly due to the consumption of inventories. The demand for raw coal has weakened and demand has shrunk. In the short term, the coking coal market will remain weak. As coal mines in various places resumed production, coal production continued to increase; coking coal production was slightly released, and the tight supply situation eased. In terms of demand: steel mills and coking plants maintain production restrictions, while steel prices and coke prices have dropped significantly, purchasing raw materials has not been active, and demand has shrunk. Policies restricted coal prices from rising, and coking coal prices fell from high levels. At present, the demand for coking coal is weak, the supply is slightly released, and the supply and demand pattern has eased; downstream coke prices are expected to increase, and coking coal support is weakened. The coking coal market prices will remain weak next week.

【Steel billet】
This week, the domestic market price of billet continued to steadily decline, and the transaction performance remained weak. This week, the performance of black futures remained poor and continued to maintain a trend of low-level volatility adjustment. The spot trading atmosphere continued to be sluggish. In addition, the downstream purchases were still low, so the current billet futures prices continued to fall. At present, the performance of different regions is different. Among them, the Tangshan region continues to implement the price-insured policy, and the ex-factory implementation is 4900 yuan/ton. The main reason is that the local billet cost is upside down, coupled with the greater pressure of environmental protection and production restrictions, steel companies have more blast furnaces to stop production, so more implementation of the price-insured policy. In Jiangsu area, because the local area is mainly imported steel billet, and the trading mode is mostly concentrated on the point price hedging operation, the price mostly follows the volatility of the thread futures disk. Therefore, there is a large room for decline this week. As of now, the spot price is 4450 yuan/ton, which is 250 yuan/ton lower than last Friday. Prices in other regions have been watching Tangshan most of the time. As the weekend approaches, prices in individual cities have fallen slightly due to the continued low quake in the futures, but the overall wait-and-see pattern has not changed. Summary: Although there is an expectation of an increase in blast furnace production in the short-term, the cost is upside down, and the supply of billet continues to remain low in the short-term. Next week, rolling mills are expected to resume production, and demand may increase by then, but they still need to beware of production pressures brought about by costs and low demand. At present, the first round of price cuts for coke has landed, and the downward trend still exists in the later stages. Ore continues to operate weakly, and the trend of low raw materials eases the production pressure of steel enterprises to a certain extent, but it still takes time for actual production to manifest. Therefore, pressure on raw material cost at steel mills still exists. In addition, the pressure on inventory and capital costs in the current market is also obvious. The recent news that the macro market is relatively bearish, coupled with continued low-level volatility adjustments on the disk, has led to more confusion in the market trading mentality and more cautious operations. On the whole, it is expected that the domestic market price of billet may continue to maintain a weak and pressured operation pattern, and the short-term recovery is still weak.

【Scrap Steel】
This week, the scrap market was weak and down, and many steel mills drastically suppressed scrap purchase prices on many occasions. Recently, rebar and iron ore futures have once again dropped their limit, and spot prices have also fallen sharply. Steel mills are willing to drastically suppress scrap purchase prices in order to control costs, and the scrap steel market has started a crazy decline mode. Among them, mainstream steel mills in East China have dropped 130 yuan/ton in two adjustments, leading the wave of price declines. The surrounding steel mills have fallen by 50-350 yuan/ton. North China has also generally lowered, with cumulative declines ranging from 100-400 yuan/ton. . Steel mills in southern China have frequently suppressed scrap prices and lowered scrap prices several times a day for three consecutive days, with a cumulative decline of between 200-250 yuan/ton. The southwestern region declined sharply, especially the Sichuan-Chongqing region started a sharp decline mode, with a cumulative decline of more than 500 yuan/ton. Currently dragged down by the decline in finished products, the scrap market shows no signs of stopping the decline for the time being. As of Friday, heavy waste in the East China market is 3,000-3180 yuan/ton excluding tax.

Supply: After several rounds of price declines, scrap suppliers’ enthusiasm for shipments has declined, and scrap yards have mostly maintained low levels after pre-shipment. At present, the weather is getting colder, and the efficiency of scrap steel output and processing has declined. It is expected that scrap supply resources will show a tightening trend.

Demand: At present, the impact of power curtailment has weakened. Although the capacity utilization rate of electric furnaces has increased, due to the sharp drop in the price of finished products, the profit of steel mills is low, and the enthusiasm for increasing production is not high. In addition, the production restrictions of northern steel mills have become stricter, and production of some blast furnace plants has been restricted, and the demand for scrap steel is weak.