Monthly data: The Bearing Steel Market may Fluctuate Downward in December

Overview: From January to October, the output of domestic crude steel bearing steel increased by 22.03% year-on-year, and the output of bearing steel increased 20.30% year-on-year. Looking back at the bearing steel market in November, the fundamentals continued to improve less than expected, the demand was still at a low level year-on-year, and the overall market price showed a downward trend. Up to now, the average price of domestic bearing round steel 50mm (continuous casting) is 6523 yuan/ton, a decrease of 365 yuan/ton from the end of October, a 5.30% month-on-month decrease. From the perspective of steel mill capacity release, the output of steel mills fell slightly in November. Taking into account that the demand is still tepid and the rate of inventory decline is not as fast as expected, it is expected that the bearing steel market price in December may fluctuate downward.

1. Domestic production of bearing steel

(1) Bearing steel output from January to October 2021: Crude steel and steel both increased year-on-year

According to statistics from the Special Steel Association, from January to October 2021, China's main premium special steel enterprises produced 3.8314 million tons of crude steel bearing steel, an increase of 22.03% compared to the same period last year. From January to October 2021, the output of bearing steel in China's major high-quality special steel enterprises was 3.3729 million tons, an increase of 20.30% compared with the same period last year, as shown in Figure 1.

(2) The output of finished products of bearing steel production enterprises from January to October 2021: the output of steel mills increased year-on-year

It can be seen from Figure 2 that the current production enterprises of bearing steel are: CITIC Special Steel (Xingcheng Special Steel, Daye Special Steel, Qingdao Iron and Steel), Zhongtian and Benxi Steel, accounting for 59% of the total output. Although some bearing steel mills have slightly reduced their production in the recent stage, the overall output of bearing steel will increase from January to October 2021. The output of Xinggang, Beiman, Shagang, Xining, Jiyuan, Shigang, Nangang, Zhongte and other steel plants Compared with the same period last year, both have increased. Only the steel plants of Jianlong, Benxi Iron and Steel, Zhongtian and Juneng have reduced their output.

2. The performance of the domestic bearing steel market

Bearing steel market prices fell sharply in November, and the overall market sentiment was relatively pessimistic. As the prices of iron ore, bi-coke and other raw materials stopped falling and stabilized, the price of bearing steel also gradually stabilized at the end of November. In the recent stage, market distributors have poor shipments, bearing steel and steel pipe mills have increased inventory pressure, and it will take time for merchants to build confidence. Given that downstream demand is difficult to recover in the short-term and fundamentals are still facing greater pressure, it is expected that domestic bearing steel prices will continue to run under pressure in December, but the decline is expected to narrow.

3. Relevant market information

(1) Raw material price:

In November, iron ore prices fluctuated and fluctuated sharply, and the spot supply and demand gap narrowed but the oversupply pattern was not changed. The Mysteel 62% Australian powder index is currently US$101.95/dry ton. It is expected that the price of ore in December will show a stepped downward trend. The stage will rebound due to changes in sentiment and expectations, and the center of gravity and high points will gradually drop. The domestic scrap steel market has fallen sharply, with an average price of 2898 yuan/ton at the end of the month. As the prices of finished products, iron ore, coal and coke and other related raw materials have fallen sharply, it is difficult for scrap prices to survive. Most steel mills have sluggish steel sales, and have drastically lowered scrap purchase prices. Taking into account that most steel mills prepare their warehouses in advance during the Spring Festival and winter, the demand for scrap has relatively improved. The scrap market has entered a game state and oscillated and adjusted its operation; the high-carbon ferrochrome market was operating weakly, with the price at 9,511 yuan/ton at the end of the month. The country as a whole is affected by the alleviation of electricity, and the output has been increased. It is expected that the ferrochrome market will continue to be weak in the short term.

(2) Downstream industries

According to the statistics and analysis of the China Association of Automobile Manufacturers, in October 2021, the production and sales of automobiles were 2.330 million and 2.333 million vehicles, an increase of 12.2% and 12.8% from the previous month, and a year-on-year decrease of 8.8% and 9.4% respectively. From January to October, the production and sales of automobiles were 20.587 million and 20.970 million, up 5.4% and 6.4% year-on-year, respectively. The growth rate continued to drop by 2.1 and 2.3 percentage points from January to September. The automobile industry has worked hard to overcome the impact of many unfavorable factors such as tight power supply and high raw material prices, and the supply of automotive-grade chips is slightly better than the third quarter. Automobile production and sales continue to show a recovery trend, and the overall situation is showing signs of improvement.

4. Conclusion

Looking back on November, the domestic bearing steel market price dropped sharply, and the pressure to destock was very obvious. In the recent stage, the price gap between GCr15 price and 45# carbon structure steel has continued to increase, with Zhongtian, Nanjing Steel and other steel plants reaching 650-880 yuan/ton, and downstream end users are more cautious in purchasing. From the current market research situation, the demand for bearing steel may recover in December, but it is difficult to change the expectation of weakening consumption in the general environment. Given that the relationship between supply and demand is still facing certain pressures, it is expected that the domestic bearing steel market prices will run under pressure in December, and the possibility of weak shocks for some materials is greater.