In March the China steel price rise space or further enlarges

Than-expected recovery in demand

This year, steel prices in the low inventory, low yield, and seasonal demand factors superimposed under warmer opened the rally prologue. Recently, the real estate market stimulus overweight, improving demand end may exceed expectations. Currently, the supply and demand pattern steel market is gradually improving, rising steel prices, or further increase the space.

BF continued low operating rates

With the rise in spot steel prices, steel production profitability turnaround. According to our estimates, the profit per ton of production by the end of November last year, a loss of 300 yuan / ton loss into the current 80 yuan / ton, per ton of steel can be said that the loss is greatly reduced. But the blast furnace steel mills start rate has remained low. As of this week, steel blast furnace operating rate remained at 73.9% before the Spring Festival, at historic lows in recent years.

According to CISA data, in January 2016 member companies of steel production was 47.2 million tons, up in January 2015 of 51.67 million tons fell nearly 8 percent. The rapid decline in production making the supply pressure of the market rate minus, North China billet prices have been steady rise in steel prices bring good.

Ore supply growth drops

With the sharp decline in mineral prices, some high-cost ore gradually withdraw from the market, this part of the mine include the high cost of domestic and non-mainstream ore mines. According to statistics, in 2014, China imported 930 million tons of ore, which mainstream mine 7.3 million tonnes of non-mainstream mine 2.1 million tons. By 2015, China imported 950 million tons of ore, which is 800 million tons of mine mainstream, non-mainstream mine is 1.5 million tons, imports of non-mainstream mine fell 5,400 tons.

At the same time, China’s domestic ore also due to higher costs and the emergence of the decline in production. 2015 production was 693.27 million tons of pig iron, pig iron production in 2014 was 706.04 million tons, reducing the consumption of ore thus lead to around 20 million tons. Ore imports in 2015 compared with 2014, an increase of 20 million tons, which means that in 2015 the domestic mine production dropped by about 40 million tons. If ore prices remained low in 2016 non-mainstream amount of domestic mines and minerals bound to fall further.

The three major ore mines at a low price with the worsening business conditions also have to reduce supply growth. 2015, Rio Tinto output growth of 11%, while in 2016 the growth rate will be cut by about 7% to 350 million tons; BHP Billiton slipped 13% in 2015 in Australia, output growth was 6%; the same period, freshwater Valley also planned output of 376 million tons in 2016 down to about 3.5 million tons. Reduced steel making raw material supply growth fell smaller space, the bottom price is higher than market expectations, formed on the steel support.

Low stock steel prices rise rapidly

Recently, the state has adopted a series of policies to stimulate the real estate market a positive. January 2016, 35 cities new commercial housing monthly new supply of 16.57 million square meters, a decrease of 29.0%, an increase of 12.6%. One, two, three lines total 35 cities new commercial housing stock was 32.64 million, 183 million and 42.88 million square meters, the chain increased respectively -3.9% – 0.8% and 0.9%, respectively, an increase of -12.9% -3.9 and -0.8%. At present, China’s real estate market becomes evident, the rapid decline in inventories. If the latter occurs sales continued to improve, it will attract long-term funds into the housing market, it will help enhance the new housing construction area.

Since the end of more than 50% of the demand for steel used for construction, steel is more than 85% for the construction industry. Therefore, once the real estate market recovery expected in the ultra-stimulation, steel prices is bound to the formation of good. Especially this year, the steel industry stocks at a relatively low since April Tangshan area also held TangShan Park will on the part of the limited production capacity, these factors make the situation of excess steel market improved. For now, the current round of rebound in steel prices still continue.