Overview: With the sudden arrival of warm winds, we usher in the fifth solar term of summer – Minor Heat, marking the official beginning of the scorching summer. However, reviewing recent steel tube prices, they have generally trended downwards. As Minor Heat passes, the blazing sun shines fiercely, winds carry heatwaves, and the air gradually becomes sultry and humid. The “barbecue + sauna” mode is about to commence. In the first half of the year, the growth rate of infrastructure slowed down. Will construction progress gradually slow down in July, as in previous years? The overall market demand is increasingly characterized by a “off-season”, and we are entering the hottest phase of the year. The prices of steel tubes have adjusted by a certain margin in the early stage. Can prices break through the siege and rebound strongly in July? Can shipments increase significantly? Below, I will briefly analyze this for you from the following aspects.
1. Price Aspect: Easy to Fall, Difficult to Rise, Focus on Stable Shipments
According to Mysteel research and statistics, as of July 5, 2024, the national average price of welded tubes (4 inches * 3.75mm) was 3,983 yuan/ton, a decrease of 85 yuan/ton compared with the same period last month (4,068 yuan/ton) and a decrease of 211 yuan/ton compared with the same period last year (4,194 yuan/ton). The national average price of galvanized tubes (4 inches * 3.75mm) was 4,591 yuan/ton, a decrease of 107 yuan/ton compared with the same period last month (4,698 yuan/ton) and a decrease of 281 yuan/ton compared with the same period last year (4,872 yuan/ton). Therefore, simply judging from the above data, the prices of welded tubes and galvanized tubes in this month both showed a slight downward trend, with the decline in welded tubes being more significant than that of galvanized tubes. This week, the production of welded tubes increased slightly, and inventory in factories rebounded. Although futures prices showed signs of recovery, the stagnation was evident, and market trading volumes continued to decline, making prices prone to sharp falls. Consequently, due to the high temperatures and frequent rainfalls, some construction sites had to slow down their construction progress. Similarly, to stimulate shipments, traders maintained stable quotes even when futures and steel mill prices rose, and a few traders still experienced negative margins in shipments.
2. Terminal downstream: Even with few purchases, we still need to look forward
According to Mysteel’s research and statistics, the nationwide welded pipe trading volume this week showed a slight decline compared to last week. From the national daily average trading volume, the nationwide daily average trading volume this week was 15,912 tons, a decrease of 683 tons or 4.48% from last week’s daily average. During the real estate recovery period, infrastructure construction, as one of the important means to stabilize economic growth, saw its growth rate slow down in the first half of the year, but the growth rate in the second half is more According to data released by the National Bureau of Statistics and local governments, the number of investment projects planned by various provinces and cities in 2024 has increased again, with significant investment in public facilities, road transportation, electricity, heating, water, and hydraulic environmental engineering, which are key growth areas in the second half of the year. In addition, since the beginning of this year, the Ministry of Finance, the Ministry of Housing and Urban-Rural Development, the China Banking and Insurance Regulatory Commission, and other departments have jointly issued relevant policies to support the real estate industry. Therefore, whether it is the reduction of bank lending rates or the economic plans and targets for 2024 announced by the government, they are conducive to creating a good macroeconomic atmosphere and laying a solid foundation for stable economic growth. In addition, although the terminal downstream has seen poor purchasing at present, with the introduction of a series of policies to stabilize the economy and growth, as well as increased investment in infrastructure, it will boost economic growth to a certain extent in the second half of the year, providing a strong impetus for reasonable economic growth in the third and fourth quarters and maintaining long-term positive, stable, and healthy economic development. Therefore, if there are no major favorable news, the author expects that the market trading atmosphere in September may gradually intensify, and market demand is expected to grow simultaneously.
3. Traders: Lack of Confidence, Focus on Reducing Inventory
As the sun rises high and temperatures climb, traders are not replenishing their inventories in large quantities, with most inventories remaining at medium to low levels. Meanwhile, the acceleration of logistics speeds means that for some markets, traders can receive goods in the warehouse or at the construction site by the afternoon after placing an order in the morning. For slightly more remote markets, goods can arrive within about three days. Given the poor market demand and the situation where prices are easy to fall but difficult to rise, traders are mainly focused on reducing inventory. In addition, according to feedback from galvanized pipe traders, the pressure of June’s agreement volume is relatively high, with the industry as a whole completing 60-85% of the agreed volume tasks, and few traders completing them fully. If demand does not increase further in July, and indoor storage costs continue to rise year by year, traders’ operations will still be dominated by medium to low inventory levels.
4. Future Market Forecast: Volatile Price Movements, Limited Demand Growth
“The Moon and Sixpence” says, “There are sixpences all over the ground, but he looked up and saw the moon.” I would like to use this quote to remind those of you in the front line of the steel market that price fluctuations are a normal market phenomenon. Although steel prices have been low recently, and the market price war is fierce, there is more we can do. It wouldn’t hurt to take a break from work, spend time with family, or meet up with friends for some entertainment and relaxation. May our steel market shine as brightly as the summer sun and be as refreshing and carefree as the breeze in the woods, so that we can enjoy the hidden “benefits” it brings.
Overall, given the poor demand in the early stage and considering the reasons for the off-season, it is expected that the growth of pipe demand in July may be limited. Currently, related black commodities such as coking coal, coke, and iron ore are all at low levels, and traders’ operating costs have been consistently high. Steel mills have no plans to reduce production, and before relevant policies are introduced, there is insufficient support for price increases. Therefore, it is expected that steel pipe prices may continue to fluctuate slightly in the near future.
