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Production cuts support the narrow fluctuations in the steel market
**Steel Market Outlook for Week 48 (2013.12.2-12.6)**
The steel market in China is currently experiencing mild fluctuations, driven by a stable macroeconomic environment and reduced production from steel mills. According to the China Iron and Steel Association, the daily crude steel output of key enterprises in mid-November was 1.75 million tons, down 0.7% from the previous month. The national average daily crude steel production stood at 2,131,900 tons, a decrease of 0.57% compared to the previous month. With the market entering its off-season, demand has gradually declined, and this trend is expected to continue throughout the week of December 2–6.
According to the Information Research Center's weekly price forecast model, steel prices are expected to remain relatively stable this week. Long product prices may see a slight decline, while plate prices should remain steady. The national steel price index is projected to fluctuate around 138.7 points, with an average steel price of approximately 3,610 yuan, showing minimal variation of about 20 yuan. The long steel price index is expected to hover around 156.1 points, declining slightly by 0.3 points, while the sheet price index is anticipated to stay near 117.5 points, with minor fluctuations of about 0.1 point.
Market research data from the Information Research Center indicates that domestic long product prices will likely decline slightly this week, while plate prices will remain stable. Raw material prices, including iron ore, will experience small fluctuations. Coke prices are expected to rise slightly, scrap prices will remain unchanged, and billet prices may see a modest drop.
In the 48th week of 2013 (November 25–29), the national comprehensive steel price index reached 138.7 points, up 0.02% from the previous week and 5.31% higher than the same period last year. The long products price index (LGMI) rose to 156.4 points, increasing by 0.12% from the prior week but decreasing by 2.33% year-on-year. The sheet price index (LGMI) fell to 117.4 points, down 0.14% from the previous week and 9.71% lower than the same period last year.
Looking at the broader market, steel stocks across the country have continued to decline for seven consecutive weeks. As of November 29, total steel inventories in 29 key cities reached 12.4471 million tons, a decrease of 98,700 tons or 0.79% from the previous week. Inventory levels for wire rods, rebar, and hot rolled coils have all slowed their rate of decline. Specifically, wire rod inventories dropped by 0.95%, rebar by 0.90%, and hot rolled coils by 0.06%. Cold rolled coil inventories fell by 0.95%, while plate stocks decreased by 1.15%.
From a macroeconomic perspective, industrial profits for enterprises above designated size increased by 13.7% year-on-year through October, reaching 4,626.3 billion yuan. In October alone, profits rose by 15.1% year-on-year to 581.04 billion yuan. Meanwhile, the iron and steel industry reported a profit of 127 billion yuan from January to September, a significant increase of 39.9% year-on-year. However, large and medium-sized steel companies saw a sharp drop in profits in October, with total profits falling by 47.46% to 1.716 billion yuan.
On the demand side, shipbuilding activity showed a year-on-year decline, with 34.8 million dwt of ships completed between January and October, a decrease of 25.4%. However, new ship orders surged by 183% during the same period. In the mechanical sector, internal combustion engine sales in October rose by 5.42% year-on-year to 4.967 million units, reflecting some recovery in the auto and construction sectors.
Overall, the steel market remains cautious as it navigates seasonal demand shifts and ongoing supply adjustments. While prices show limited movement, investors and industry participants are closely monitoring macroeconomic indicators and inventory trends for potential signals of future direction.