Monthly Summary: The market price of bearing steel is expected to stabilize and become stronger in May

Monthly Summary: The market price of bearing steel is expected to stabilize and become stronger in May

Overview: From January to March 2024, the domestic crude steel production of bearing steel increased by 12.50% year-on-year, and the production of bearing steel increased by 6.92% year-on-year. Looking back at the market situation in April, terminal enterprises were cautious in purchasing, and the improvement in market demand was not significant. Given the fluctuating prices of coking coal and coke raw materials, the domestic bearing steel market prices have slightly declined. As of now, the average price of domestic bearing steel 50mm (continuous casting) is 5067.5 yuan/ton, a decrease of 85 yuan/ton compared to the beginning of the month. Starting from late April, raw material prices have slightly increased, and steel mills have successively announced price adjustment policies, which may have a certain supportive effect on the spot market price of bearing steel. It is expected that the bearing steel market price will show a slight upward trend in May.

Ⅰ Domestic production of bearing steel

1. Bearing steel production from January to March 2024: year-on-year growth in crude steel and steel mills

According to statistics from the Special Steel Association, from January to March 2024, the crude steel production of bearing steel by China's major special steel enterprises was 1.3862 million tons, an increase of 12.50% compared to the same period last year; From January to March 2024, China's main premium steel enterprises produced 1.1405 million tons of bearing steel, an increase of 6.92% compared to the same period last year.

2. Bearing steel production in April 2024: Steel production decreased month on month

According to the 21 samples collected by the Bearing Steel Research Group, the main premium steel enterprises in China produced 3790000 tons of bearing steel in April 2024. Among them, 30.75 tons of bars accounted for 81.13%; 71500 tons of wire, accounting for 18.87%.

According to the research sample, it can be seen that the total production of bearing steel in April has slightly decreased compared to the previous month, while the production of wire rods has slightly increased and the production of bars has declined. The total amount of bearing steel decreased by 3.19% month on month, the increase in wire rod was 2.14%, and the decrease in bar material was 4.35%.

3. Since 2023, the finished product production of bearing steel production enterprises has slightly increased: the total production of steel mills

At present, the production enterprises with larger output of bearing steel are CITIC Special Steel (Xingcheng Special Steel, Daye Special Steel, Qingdao Special Steel), Jiyuan Steel, and Juneng, accounting for 39%, 10%, and 9% respectively. In March 2024, the production of bearing steel increased slightly compared to the previous month. Among them, steel mills such as CITIC Special Steel, Juneng, and Zhongtian saw an increase in production, while steel mills such as Jiyuan Steel, Jianlong Beiman, and Dongte Group saw a decrease in production.

Ⅱ Performance of Domestic Bearing Steel Market

In April, the price of bearing steel in the market slightly declined, and merchants had a strong wait-and-see attitude. In the first half of the year, due to the weakening of raw material prices and insufficient enthusiasm for downstream terminal procurement, overall demand performance was weak, and market prices began to decline. In the middle and late stages, raw material prices began to rise, and spot prices of bearing steel stopped falling and stabilized. In terms of inventory, given that actual transactions have not reached the expected level, inventory consumption is slow, and the overall society is still at a relatively high level. Considering the fluctuation and upward trend of raw material prices for coking coal and coke, which has a certain supportive effect on the spot market, it is expected that the bearing steel market price may stabilize and become stronger in May.

Ⅲ Related market information

1. Raw material prices

From a fundamental perspective, iron ore has weak supply and strong demand. On the supply side, the recent supply of iron ore from 45 ports in China has stopped increasing and turned to decreasing. On the demand side, with the recent maintenance of normal inventory reduction in the finished product end, the financial pressure on most domestic steel mills has eased, and the motivation for steel mills to resume production has also increased. The daily average iron production of 247 steel companies has increased on a weekly basis. On the inventory side, the iron ore inventory of 45 ports in China continues the trend of accumulated inventory in the previous 17 periods, at a relatively high level in the same period of the past 3 years. As of the end of April, iron ore was $117.5 per dry ton, an increase of 20% compared to the beginning of the month.

The current price of scrap steel is 2868.4 yuan/ton, an increase of 2.6% compared to the end of last month. Recently, the demand for steel has gradually returned to rationality, and the recent price increase has shown signs of weakness, leading to a significant slowdown in the rise of scrap steel. With the continuous upward movement of raw material prices, the profitability of steel mills has always been average. Recently, there has been a general preference for scrap steel arrival in steel mills, and scrap steel inventories in many places have shown an increasing trend. Some steel mills have even experienced temporary pressure on vehicles. However, considering that the inventory of scrap steel in some regions is still low, and the demand for replenishing inventory in the May Day holiday steel mills is relatively strong. In addition, driven by the continuous positive macro news, the overall support at the bottom of scrap steel is relatively strong.

The average price of high carbon ferrochrome is 8800 yuan/ton, a decrease of 0.19% compared to the end of last month. The spot price of high carbon ferrochrome runs steadily, while the prices of chrome ore, coke, national electricity and freight remain stable. The immediate smelting cost of high carbon ferrochrome production is temporarily stable. Recently, the chromium ore market has remained stable, and coke has rebounded strongly. Currently, three rounds of price hikes have been implemented, and it is expected that the cost of high carbon ferrochrome will remain stable and strong in the short term.

2. Downstream industries

According to data released by the China Association of Automobile Manufacturers, in March, the production and sales of automobiles reached 2.687 million and 2.694 million respectively, with a month on month increase of 78.4% and 70.2%, and a year-on-year increase of 4% and 9.9%, respectively. A large number of new cars have been launched, and offline activities such as car exhibitions have been carried out one after another. Some regions have introduced promotional policies such as exchanging old cars for new ones, which has driven a rapid growth in car sales compared to the previous year.

In March, the domestic sales of new energy vehicles reached 758000 units, a month on month increase of 92.1% and a year-on-year increase of 32%; The export of new energy vehicles reached 124000 units, a month on month increase of 52% and a year-on-year increase of 59.4%. From January to March, the domestic sales of new energy vehicles reached 1.783 million units, a year-on-year increase of 33.3%; The export of new energy vehicles reached 307000 units, a year-on-year increase of 23.8%.

Ⅳ Summary

In April, the price of bearing steel in the market fluctuated downward, and demand was lower than the same period in previous years, continuing the strong supply and weak demand situation in the market. With the gradual implementation of policies that promote economic stability and progress, the production and sales of the automotive industry have shown a year-on-year and month on month growth trend, and market demand may be slightly released in the later stage. Considering the supportive effect of raw material coking coal and coke prices, it is expected that the bearing steel market price will slightly increase in May.