Steel Prices Rise Sharply as Peak Season Arrives

As the peak season for the steel market approaches, steel prices have finally shaken off their previous slump. Particularly since the late September, steel prices have shown a significant upward trend. Observations show that from September 23 to October 9, the Lange Steel Absolute Price Index surged from 3485.0 yuan to 4020.4 yuan, marking a staggering increase of 15.36% in just half a month.

Wang Guoqing, Director of the Lange Steel Research Center, said in an interview with the "Securities Daily" that recent rapid increases in steel prices, bolstered by increased policy support, warming demand, and cost support, have not only boosted market confidence but also raised the profitability of steel companies. As the peak demand season arrives, the market environment is gradually improving, and steel companies are expected to turn losses into profits in October.

Specifically, in late September, the prices of steel products rebounded swiftly. According to the latest data released by the National Bureau of Statistics, the price of rebar increased by 149.5 yuan per ton compared to the mid-September, a rise of 4.6%, making it one of the leading gainers among the 50 important production materials in the national circulation sector.

The increase in rebar prices is not an isolated case. Since late September, prices of other steel products such as hot-rolled coil and cold-rolled coil have also seen varying degrees of increase. For instance, at the end of September, the spot transaction price of cold-rolled coil in Shanghai was about 4000 yuan per ton, and during the National Day holiday, some businesses even raised prices to 4200 yuan per ton.

Chu Xiao, an analyst at Zhuochuang Information, stated that the main driver of the steel price increase in September was the boost from macro-policy news, with the market having improved expectations for terminal demands such as real estate, which supported the strength of downstream steel products.

Wang Guoqing also noted that since September, the implementation of multiple national financial policies, including the central bank's reduction of the reserve requirement ratio, the lowering of existing mortgage rates, and the unification of the minimum down payment ratio for mortgages, have effectively improved market liquidity and boosted market confidence.

With the warming of demand and the rise in steel prices, the Steel Circulation PMI index has returned to the expansion zone after four months. According to data jointly released by the China Metal Materials Circulation Association and Lange Steel Network, the Steel Circulation PMI index was 51.8% in September 2024, up 5.2 percentage points from August.

Driven by the peak season, the profitability of steel companies is gradually improving. Monitoring data from the Lange Steel Research Center shows that in September, the gross profit for immediate and two-week inventory raw materials for grade three rebar was 93 yuan per ton and 68 yuan per ton, respectively, both turning from loss to profit; the calculated losses for immediate and two-week inventory raw materials for hot-rolled coil were 201 yuan and 225 yuan, respectively, which was 48 yuan per ton and 121 yuan per ton less than the previous month.

Chu Xiao believes that in September, driven by the expectation of demand improvement, steel prices generally rebounded, while the price increase momentum of raw materials such as coke and scrap steel slowed down, leading to improvements in the gross margins of the steel industry chain, especially for construction steel, wire rod, and pig iron, which saw significant increases in profits month-on-month.

For the market trend in October, the market remains optimistic. Zhuochuang Information believes that with the continuous implementation of macro policies, demand is expected to further improve, and with the peak demand season, terminal construction will remain at a relatively high level, potentially improving the market supply and demand pattern. Overall, steel prices are expected to continue to rise in October.

Wang Guoqing said, "With the fluctuating and rising trend of the steel market in October, it is expected that steel companies will be able to turn losses into profits."