Short term steel market analysis

Demand: according to historical data, affected by the Spring Festival holiday, the steel demand in January and February generally decreases gradually, and reaches the valley value during the Spring Festival, and the steel demand gradually returns to the normal level 3-4 weeks after the festival. Affected by COVID-19, steel demand returned to normal after 7-8 weeks last year. As the domestic epidemic prevention and control system is mature, the steel demand is expected to return to the normal level in the middle and late March of this year.

Supply: at present, domestic steel mills generally make small profits or losses. In January, domestic steel mills gradually increased maintenance and reduced production. In the first half of February, the number of steel mills scheduled for maintenance continued to increase, and it is expected that the steel mills will resume production after the Spring Festival.

Inventory: in the third week before the Spring Festival in 2021 (up to January 28), the total stock of steel (factory warehouse + social warehouse) was 17.85 million tons, an increase of 30.5% compared with the third week before the Spring Festival in 2020, and an increase of 32.2% compared with the third week before the Spring Festival in 2019. February is still in the inventory accumulation stage, and the peak may appear in the middle of March.

Cost: due to high cost pressure, Spring Festival holiday and other factors, the blast furnace of steel mill expanded maintenance and reduced production in February. At the same time, imported iron ore port inventory gradually accumulated, high ore prices have adjustment pressure.