Iron ore costs skyrocketed, downstream demand was not as good as expected, but crude steel production growth momentum is still strong - this is a big strange phenomenon of the previous steel market. Can the consumption of steel and the profits of steel enterprises be sustained?

As expected, the steel market has experienced inventory pressure. According to the latest data of Xiben Shinkansen, at present, the domestic screw steel inventory is up to 6455400 tons, an increase of more than 2 million tons over the same period last year. At the same time, the price of screw steel also fell to a new low within the year.

For this reason, steel enterprises in Shandong, Sichuan and other places have recently decided to limit production with guaranteed prices, and the maintenance rate of steel plants is also rising.

Some steel enterprises in Shandong Province held an information exchange meeting on August 13, and major building materials manufacturers reached a number of consensus, including six steel mills that will reduce the production of building materials by 400000 tons, with limited production and guaranteed price. The price of building materials in Shandong is lower than that in the north and south, and then the price difference is gradually recovered. In addition, Shandong steel works will strengthen information communication and price coordination with other leading steel works in neighboring provinces to jointly maintain the stability of the steel industry.

Coincidentally, Sichuan local metallurgical Holding Group Co., Ltd. held a group meeting on August 12 to promote the production restriction arrangement of production enterprises within the group. According to the schedule, 11 subordinate iron and Steel Enterprises Limited production in batches from August 12 to 27 and supervised each other.

In the view of the people in the steel industry, the production limit of the steel industry is a little late.

According to the data of the National Bureau of statistics, the output of pig iron from January to July 2019 was 473.44 million tons, up 6.7% year on year; the output of crude steel from January to July was 577.06 million tons, up 9.0% year on year; the output of steel from January to July was 697.76 million tons, up 11.2% year on year. Compared with the downstream consumption situation, the output growth is too fast.

According to the monitoring data of Lange Iron and steel network, as of August 2, the blast furnace operation rate of 100 small and medium-sized steel enterprises in China was 81.3%, 8.6 percentage points higher than the previous low point (March 29 this year). In addition to the increase of advanced production capacity, the growth rate of national crude steel output in the first half of this year reached 9.9%.

"After the continuous decline in prices since July, the spot price is at the low level of the year. Not only steel agents have already started to lose money, but most plate steel enterprises have also lost money. It is difficult for building materials steel enterprises to have profits." Sun Hui, director of Xiben Shinkansen Research Center, said in an interview with Shanghai Stock Exchange.

Chen Kexin, chief analyst of Lange Iron and Steel Research Center, said that as long as per ton of steel is profitable, no matter how many orders and five applications are made, they will not stop steel enterprises from increasing production. Due to the general fall of steel market price in recent years, the profit level of iron and steel enterprises has shrunk sharply, and some enterprises and steel varieties even have losses. If it can last for a period of time, it is bound to greatly curb the production increase of iron and steel enterprises, so as to slow down the market supply pressure and create conditions for price recovery.

According to the monthly data, the crude steel production of China began to decline in June. The output in June and July decreased by 1.75% and 2.64% month on month, respectively.

In addition to defining the production limit and insurance price, according to Mysteel statistics, the situation of steel plant's active maintenance also began to increase. As of August 13, there are more than 38 identified overhaul steel plants, and the average overhaul days in nine regions have been confirmed as 7.29 days, with a total of 84150 tons of daily average affected production. At present, the impact of production restriction has reached 1489400 tons. In the case of steel mills' initiative to limit production, market confidence has been significantly boosted, and the national steel market has stabilized or even started to rebound.

Sun Hui told reporters that in the early stage, steel prices were continuously revised back, and the market panic was released. Considering the good seasonal demand in the late stage, the environmental protection in the North may be pressurized, and the market steel prices may rebound moderately. However, this year's steel market inventory is too large, so the market should be cautious and optimistic in the short term.