According to information released by the China Iron and Steel Association on the 22nd, in the first quarter, steel prices continued to fall, and the efficiency of steel companies fell sharply. China Steel Association's key statistics of member companies' sales revenue was 891.6 billion yuan, a year-on-year decrease of 5.6%; total profit was 18.3 billion yuan, a year-on-year decrease of 50.8%.
Faced with the still high steel stocks, China Steel Association called on steel companies to maintain a clear understanding of the market situation, strengthen industry self-discipline, organize production on demand, and maintain market stability.
"Steel production is a typical hot continuous production process. Basically, there is no problem of resuming production and production is generally stable." He Wenbo, executive chairman of the China Steel Association, said that in the first quarter, the national crude steel output was 23.445 million tons, a year-on-year increase 1.2%; steel production was 264.74 million tons, although the year-on-year decline was 1.6%, but due to the impact of the epidemic, the demand for real estate, infrastructure construction, automobiles, shipbuilding and other industries fell sharply, eventually making the steel market oversupply and rising inventories.
As of early March, the stock of steel mills monitored by the China Steel Association was 21.41 million tons, and the social stocks of 5 types of steel in 20 cities were 20.21 million tons, all exceeding the historical peak. Although after mid-March, with the release of downstream demand and the smooth flow of goods, inventories began to decline, but as of the end of March, steel mill inventories and social inventories were still higher than the same period in previous years.
At the same time, steel prices continued to fall. China Steel Association data show that as of the second week of April, China's steel price index fell to 96.86 points, the lowest since May 2017, a cumulative decrease of 8.71% from the beginning of this year.
The divergence of mineral prices and steel prices is also an important factor in reducing corporate profits. According to data from the General Administration of Customs, in the first quarter, China imported 260 million tons of iron ore, an increase of 1.3% year-on-year; the average import price was US $ 90.59 per ton, an increase of 11.7% year-on-year. In the same period, steel prices fell by 5.7% year-on-year.
"With the active expansion of effective investment and the accelerated resumption of production in major steel industries, it is expected that the demand for steel in the second quarter will increase significantly compared with the first quarter. However, the continued high steel inventory is bound to affect the stable operation of the future market." Exceeding market demand, the process of destocking will be very difficult. High inventory may become the norm in the steel market this year.
