Steel market has increased risk of price swap or facing reshuffle

Faced with the current downturn in the market, domestic steel companies such as Baosteel and Wuhan Iron and Steel have announced that they will cut the price of their products in August. People can't help but sigh, even though it is still midsummer, but the steel market has already had a winter chill.

The ex-factory price announced by Baosteel in August shows that the price of its mainstream products such as hot-rolled and cold-rolled is lowered by 200 yuan to 300 yuan. It is worth noting that this is the second consecutive month that Baosteel has offered a “fall”. Subsequently, another major steel mill, WISCO, also announced the ex-factory price of its products last week. It also lowered the hot-rolled high-grade carbon steel, gas cylinder steel and automobile steel by 150 yuan/ton, and down-rolled bridge steel and wear-resistant steel. High-strength steel 200 yuan / ton, down the cold rolled coil factory price of 100 yuan / ton. Affected by this, other domestic steel mills have also lowered the ex-factory price of their products.

Analyst: Baosteel prices were continuously lowered in July and August. Prices such as Angang, Wuhan Iron and Steel, and Shougang also followed the decline, and the prices of major varieties fell by 100-300 yuan. In addition, we have seen the price of building materials steel mills, such as Shagang sunshine, also continued to decline. Some small steel mills have introduced some insurance policies and credit policies, which means that the price war between steel mills is also very fierce.

Jiuquan Iron and Steel Group staff: The basic price is 4160, and the price of other various specifications is adjusted. These two days have fallen sharply. I estimate that they may adjust the price again in these two days.

For the price reduction of this round of steel mills, the industry consensus is that it is mainly affected by the market downturn, the tight supply of traders' funds, and the high inventory of steel mills. According to statistics from the China Iron and Steel Association, the steel stocks of the key enterprises in the first quarter of July were 11.7904 million tons, an increase of 405,900 tons or 3.57% over the previous year. Huge inventory pressures have forced mills to choose to trade at a price.

Mr. Xu, a senior steel trader: Steel mills' inventories are gradually increasing. Now the pressure on steel mills' inventory is indeed relatively large, so they have to take the initiative to join the ranks.

Analyst: As banks have reduced their loans to steel traders, this has led to limited financing for steel trade, difficulty in financing, and the need for traders' intermediate demand and stocks has shrunk dramatically, and inventory pressure has to be transferred to steel mills. . On the other hand, it is faced with such a shrinking downstream consumer market, so that price cuts are also an option that it can't.

Steel price drop survey

I would rather lose the price and not reduce the steel production.

Although domestic steel mills have to choose to cut prices in the face of high inventory, most companies have not revealed any signs of production cuts. Why? Continue to look at the report.

It is worth noting that despite the rising inventory of steel mills and the sluggish market demand, most steel mills prefer to cut prices and are not willing to cut production. The data released by China Steel Association shows that as of early July 2012, the focus is large. The daily output of medium-sized enterprises in crude steel was 1,657,400 tons, which was still up by 0.44%.

Analyst: We are seeing that steel mills are now taking more and less price reductions, so that the market does not let the market do the same. It is more to keep its market share by falling prices, instead of considering reducing production. To maintain this balance between supply and demand

In the face of the current domestic steel prices, most steel mills are already struggling to maintain. According to the data of China Steel Association, from January to May this year, the total profit of domestic key steel enterprises was only 1.31 billion yuan, down 96.2% year-on-year, of which steel partially lost 9.66 billion yuan. Since June, steel prices have continued to weaken after hitting new lows in the year, and steel mills' profits are not optimistic. So in the face of such a tight profit situation, why do most steel mills prefer to continue to choose to lose money and choose not to cut production?

Jiuquan Iron and Steel Group staff: There are many companies that are pursuing this scale of benefits, in theory, this is the case.

After you have produced it, this fixed fee can't be diluted. In fact, it's all dead. Anyway, I can see who can hold it, and see his financial situation.

Senior steel trader: Because you have to know, there are many private enterprises now, there are many loans in the bank, they can't stop at all. From the current situation, whoever stops, no one may have a chance to live again. Come over, because why he has a lot of creditors, many creditors, as long as you see that your factory is running, those creditors may be a little more stable. You may be separated by others as long as you stop. After the grab is over, there may be no chance to get up again.

Increase the risk of price changes in the steel industry or face shuffling

However, industry insiders predict that this situation of changing prices to the market will soon be unsustainable. As the losses of steel mills expand, the cash flow will gradually dry up. At that time, the domestic steel industry may face a major reshuffle.

Reporter: If you feel that you can't stand it, which one can't stand it? Is it a small steel mill?

Jiuquan Iron and Steel Group staff: I can't help but say that the small steel mills are those that are poorly managed and costly. He is not profitable. If your money can't keep up, you may fall down first.

Reporter: Assuming the market is still like this, how long will it happen?

Jiuquan Iron and Steel Group staff: In the second half of this year, anyway until next year, I think it is the hardest, most difficult, most painful and most testable time for the manufacturing industry.

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