In February, the domestic steel market experienced weak demand, with a surge in steel production exacerbating the supply-demand imbalance and leading to continued price declines. As temperatures rose, expectations of improved market demand in the latter part of the month were somewhat optimistic, but overall, the improvement remained limited, making a sharp rebound in steel prices unlikely.
1. **Domestic Steel Prices Continue to Decline**
At the end of February, the comprehensive CSPI steel product index stood at 96.46 points, down 1.19 points from the previous period, a 1.22% decrease—slightly less than the previous month’s drop. This marked the sixth consecutive month of decline. The long product index fell by 1.68 points (a 1.67% drop), while the sheet metal index dropped by 0.74 points (a 0.76% decrease). Long products saw a more significant price fall compared to sheets, with a 0.91 percentage point gap. Year-over-year, the long product index decreased by 14.66 points (12.94%), and the sheet metal index dropped by 15.85 points (14.17%).
2. **Major Steel Products Prices Remain Under Pressure**
The eight major steel products monitored by the China Iron and Steel Association all saw price declines at the end of February. Excluding cold-rolled steel and hot-rolled seamless tubes, most price drops narrowed from the previous month. High-line and rebar prices fell by RMB 58/ton and RMB 78/ton respectively, while angle iron dropped slightly by RMB 8/ton. Plate, hot rolled coil, cold rolled sheet, galvanized plate, and seamless steel pipe prices fell by 11, 24, 31, 5, and 49 yuan/ton respectively.
3. **Weekly Price Trends Show Continued Decline**
Throughout February, steel prices showed a slight downward trend week by week. By the second week of March, the CSPI steel price index had declined for 11 consecutive weeks, reflecting a sustained downward momentum.
**Market Analysis: February Steel Price Trends**
Despite the seasonal off-peak demand, the domestic steel market faced worsening supply-demand imbalances due to rapid steel output growth. Additionally, falling raw material prices further weakened the supporting effect on steel prices.
1. **Slowing Demand and Economic Growth**
According to National Bureau of Statistics data, fixed asset investment in January-February grew by 17.9%, a 3.3% decrease year-on-year. Industrial output above designated size increased by 8.6%, down 1.3 percentage points from the same period last year. The manufacturing PMI in February was 50.2%, down 0.3 percentage points from the previous month, marking the third consecutive month of decline. New orders fell by 0.4 percentage points, and PPI dropped 2.0% year-on-year for the 24th consecutive month. Money supply growth slowed, with M2 increasing by 14.2%, lower than the same period last year. Net cash withdrawal reached 1.42 trillion yuan, and new credit additions totaled only 644.5 billion yuan, down 51.2% from the previous quarter. Overall, demand for steel remained weak.
2. **Rising Steel Production Intensifies Oversupply**
Total pig iron, crude steel, and steel output in January-February reached 116.72 million tons, 13.80 million tons, and 165.73 million tons, respectively, with year-on-year increases of 0.2%, 1.7%, and 4.9%. Crude steel daily output rose to 2.217 million tons, up 10.2% from December. Steel exports surged by 26.3%, while imports rose by 16.8%, resulting in a net export of 982,000 tons—an increase of 28.87%. Domestic supply continued to grow, intensifying oversupply conditions.
3. **Raw Material Prices Drop, Weakening Steel Price Support**
Iron ore, coking coal, and scrap prices all fell significantly in February. Domestic iron concentrate and imported iron ore dropped by 27 and 50 yuan/ton, respectively, a 2.77% and 5.56% decrease. Coking coal and metallurgical coke prices fell by 80 and 110 yuan/ton, or 7.34% and 8.45%. Scrap prices also declined by 24 yuan/ton. These sharp drops reduced the support for steel prices.
**International Market Trends**
Global steel prices continued to decline in February. CRU’s composite steel price index stood at 164.9 points, down 3.4 points from the previous quarter, or 2.0%—a drop of 8.9% year-on-year. Long product and sheet prices both fell, with long products dropping 4.4 points (2.4%) and sheets falling 2.7 points (1.7%). Compared to the same period last year, long products fell 22.4 points (11.1%), and sheets dropped 12.5 points (7.3%).
**Regional Market Performance**
- **North America**: The CRU North American steel price index fell 5.3 points (2.9%) in February. U.S. manufacturing PMI rose to 53.2%, but the production index dropped sharply, indicating reliance on inventory rather than new demand.
- **Europe**: The CRU European steel price index dropped 3.8 points (2.4%). German and Italian manufacturing PMIs declined, while France’s PMI remained below 50.
- **Asia**: The CRU Asian steel price index fell 2.5 points (1.5%). Japan, China, and South Korea all saw declines in new export orders.
**Future Outlook**
With warmer weather, domestic steel demand is expected to gradually recover. However, economic slowdowns may continue to limit demand growth. With oversupply still prevalent, steel prices are likely to stabilize in the coming months but remain under pressure to rise sharply.
1. **Economic Growth and Urbanization Drive Steel Demand**
China’s GDP target for this year is set at around 7.5%, slightly lower than previous years. Urbanization remains a key driver of economic growth and infrastructure investment, which will continue to support steel demand. However, slowing economic growth may temper demand expansion.
2. **High Inventory Levels and Falling Prices**
As of early March, the CSPI steel price index hit its lowest level since 2006. Despite expectations of a bottoming out, inventory levels have risen, putting pressure on future price trends.
3. **Raw Material Prices Still Have Room to Fall**
Iron ore prices fell to $107.89/ton, while coking coal prices have been rising. Compared to steel prices, raw materials still have room for further declines, continuing to weigh on steel prices.
**Key Issues to Watch**
- **High Steel Output Hinders Price Recovery**
- **Low Prices Reduce Corporate Efficiency**
- **Rising Trade Frictions Limit Export Opportunities**
Overall, the steel market remains under pressure, with weak demand, high inventories, and falling raw material prices all contributing to ongoing downward trends.
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