Monthly Summary: The market price of bearing steel is expected to slightly increase in June

Monthly Summary: The market price of bearing steel is expected to slightly increase in June

Overview: From January to April 2024, the domestic crude steel production of bearing steel increased by 3.6% year-on-year, and the production of bearing steel increased by 1.75% year-on-year. Looking back at the May market situation, market prices have fallen slightly due to demand suppression, market transactions are average, and merchants are showing a pessimistic sentiment. As of now, the average price of domestic bearing steel 50mm (continuous casting) is 5067.5 yuan/ton, which is basically the same as the beginning of the month. After mid May, raw material prices will continue to remain high, and the support for bearing steel cost prices will be strong. The market price will stabilize. Considering the cost aspect, it is expected that the bearing steel market price will slightly increase in June. In the future, we should continue to pay attention to the release of demand.

Ⅰ Domestic production of bearing steel

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

According to statistics from the Special Steel Association, from January to April 2024, the crude steel production of bearing steel by China's major special steel enterprises was 1.688 million tons, an increase of 3.6% compared to the same period last year; From January to April 2024, China's main premium steel enterprises produced 1.4418 million tons of bearing steel, an increase of 1.75% compared to the same period last year.

2. Bearing steel production in April 2024: month on month decline in steel production

According to the 21 samples collected by the Bearing Steel Research Group, the main premium steel enterprises in China produced 376200 tons of bearing steel in May 2024. Among them, 309500 tons of bars accounted for 82.27%; 70000 tons of wire, accounting for 17.73%. According to the research sample, it can be seen that the production of bearing steel in May did not decrease significantly compared to April, with a slight increase in bar production and a slight decrease in wire production. The total amount of bearing steel decreased by 0.73% month on month, bar materials increased by 0.65%, and wire materials decreased by 6.71%.

3. From January to April 2024, the finished product production of bearing steel production enterprises: the total production of steel mills increased slightly

At present, the production enterprises with large output of bearing steel are CITIC Special Steel (Xingcheng Special Steel, Daye Special Steel, Qingdao Special Steel), Jiyuan Iron and Steel, and Juneng, accounting for 58% of the total output. From January to April 2024, the overall production of bearing steel slightly increased. Steel mills such as CITIC, Juneng, Nangang, Zhongtian, Jianlong Beiman, and Laiwu Special Steel saw an increase in production compared to the same period last year, while steel mills such as Jiyuan, Dongte Group, Shigang, Bensteel, Jiangsu Yonggang, Magang, and Xining Special Steel saw a decline in production.

Ⅱ Performance of Domestic Bearing Steel Market

The price of bearing steel in the market remained stable and weakened in May. At the beginning of the month, market demand was released less than expected, and there were fewer bulk orders in the market, leading to a short-term bearish sentiment in the market. In the middle of the month, downstream purchases were mostly made on demand, with low stocking intentions. Market demand did not improve, and merchant quotations began to decline narrowly. From mid to late October to the end of the month, as raw material prices continue to rise, steel mills have gradually raised the ex factory price of bearing steel, and market prices have stabilized. Most businesses choose to negotiate prices on a single basis. Overall, it is expected that the price of bearing steel in the market will slightly increase in June.

Ⅲ Related market information

1. Raw material prices

The overall trend of iron ore prices in May showed a volatile upward trend, with the port spot price index performing weaker than forward prices. As of May 29th, the forward spot price index of 62% Australian iron ore powder is 117.65 US dollars/dry ton, an increase of 15.34% from April. The PB powder price at Qingdao Port is 872 yuan/ton, an increase of 11.93% compared to the previous month. The increase in iron ore supply is greater than demand, and the inventory at Port 45 may show an accumulation trend. In the future, there will be a test of downstream demand off-season, but the contradiction has not been highlighted in the short term. Iron ore prices are expected to show resilience under the influence of demand. In summary, it is expected that the price of iron ore will remain high and volatile in the short term.

The current spot price of high carbon ferrochrome is 8900 yuan/ton, an increase of 100 yuan/ton compared to the beginning of the month. Recently, the spot price of high carbon ferrochrome has been relatively strong, with coke prices, national freight and electricity costs remaining stable. The spot price of chrome ore powder has increased by 1-2 yuan/ton, and the spot cost of high carbon ferrochrome production has increased by 9-72 yuan/50 basis tons. The spot price of chromium ore at the port continues to rise, and the rise in futures has slightly slowed down. The high cost production situation of factories in the future will continue to exist, and it is expected that the cost of high carbon ferrochrome will remain high and fluctuate in the short term.

The current price of scrap steel is 2500 yuan/ton, an increase of 80 yuan/ton compared to the beginning of the month. Recently, steel companies have begun to slightly reduce the purchase price of scrap steel, mainly due to the poor performance of finished product futures and spot prices. Some steel mills have actively avoided risks, and inventory pressure has shifted to suppliers, with a clear price pressure mentality. Scrap steel has lost its price support, and may fall behind in the near future. The trend of finished product and related raw material varieties is expected to be not too large in the short term.

2. Downstream industries

According to data released by the China Association of Automobile Manufacturers, China's automobile production and sales reached 2.406 million and 2.359 million units respectively in April, an increase of 12.8% and 9.3% year-on-year. Among them, the production and sales of new energy vehicles reached 870000 and 850000 respectively, with year-on-year growth of 35.9% and 33.5%, and market share reached 36%. In April, China exported 560000 vehicles, a year-on-year increase of 31.2%. According to the data, the performance of automobile exports continues to be impressive. Since the Spring Festival, the demand for cars has gradually recovered, and various car companies have shown a variety of cars. Coupled with the implementation of the old for new policy to eliminate wait-and-see sentiment, passenger car sales have continued to rise quarter by quarter, but competitive pressure remains high. With the gradual implementation of policies, it is expected to boost market demand, and the overall situation of the automotive industry is stable and improving.

Ⅳ Summary

The price of bearing steel in the market remained weak and stable in May. In terms of supply, the production of bearing steel in May has decreased compared to April. Due to the weakening demand, social inventory has shown a slight accumulation in the early stage. At present, merchants mainly rely on selling inventory to recover funds. In terms of demand, as the market gradually enters the off-season and is affected by seasonal high temperatures, there are signs of weakening demand, and the profit margin of varieties has slightly narrowed. However, the decline in market order volume is not significant. Considering the sustained high prices of raw materials, merchants still maintain a cautious and optimistic attitude towards the future trend of steel prices. Overall, it is expected that the price of bearing steel in the market will slightly increase in June, and the extent of the increase still needs to be monitored by the release of demand.