Monthly Summary: The market price of bearing steel is Expected to Rise in September

Monthly Summary: The market price of bearing steel is Expected to Rise in September

Overview: From January to July 2024, the crude steel production of domestic 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 market situation in August, market prices fell significantly due to weak demand, and there was an increase in low-priced sales with insufficient market confidence. However, at the end of the month, the black market rebounded, and market prices stabilized. The terminal had purchasing plans, and demand gradually rebounded, and market confidence gradually recovered. As of now, the average price of 50mm (continuous casting) bearing steel in China is 4814 yuan/ton, a decrease of 181 yuan/ton or 3.62% from the beginning of the month. Looking ahead to September, the market price of bearing steel is expected to rise, but the sustainability is limited.

Ⅰ Domestic production of bearing steel

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

According to statistics from the Special Steel Association, the crude steel production of bearing steel by major special steel enterprises in China from January to July 2024 was 4.189 million tons, an increase of 3.6% compared to the same period last year; The production of bearing steel by major special steel enterprises in China from January to July 2024 was 3.768 million tons, an increase of 1.75% compared to the same period last year.

2. Bearing steel production in August 2024: Steel production decreases month on month

According to the 21 samples collected by the Bearing Steel Research Group, the production of bearing steel by major special steel enterprises in China in August 2024 was 352200 tons. Among them, 285700 tons of rods accounted for 81.12%; 66500 tons of wire, accounting for 18.88%.

According to the research sample, it can be seen that the production of bearing steel bars in August decreased compared to July, but the decrease was not significant. The production of bearing steel wire rods increased compared to July. The total amount of bearing steel decreased by 1.32% month on month, rod decreased by 7.24%, and wire increased by 1.37%.

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

At present, the major producers of bearing steel are CITIC Special Steel (Xingcheng Special Steel, Daye Special Steel, Qingdao Special Steel), Jiyuan Steel, and Juneng, accounting for 58% of the total production. The overall production of bearing steel increased slightly from January to July 2024, with production from steel mills such as CITIC, Juneng, Nangang, Laiwu Special Steel, and Magang increasing compared to the same period last year. Production from steel mills such as Dongte Shares, Jianlong Beiman, Shigang, Benxi Iron and Steel, and Jiangsu Yonggang all declined.

Ⅱ Performance of domestic bearing steel market

The market price of bearing steel fell sharply in August. At the beginning of the month, due to poor market demand, steel mills mainly lowered their guidance prices, and the market showed obvious pessimism. In the middle of the month, there was a lack of market confidence, leading to an increase in low-priced sales and a significant drop in market prices. At the end of the month, the market price of bearing steel was significantly suppressed by demand, but the black market gradually rebounded, and the market price first fell and then stabilized. In September, some steel mills raised the factory guidance price of bearing steel, and the price rebounded initially. At the beginning of the month, there were purchasing plans at the end of the month, and the market atmosphere began to be active. Market confidence was temporarily restored, and it is expected that the market price of bearing steel will rise in September, but the sustainability of the rise is limited.

Ⅲ Related market information

1. Raw material prices

The price trend of iron ore in August was relatively strong, with the Mysteel62% iron ore index at 101.2, up 0.6. The amount of iron ore dredging in Port 45 is 3.026 million tons, which is at a relatively high level in recent months. Firstly, domestic mines are affected by safety supervision, resulting in a certain reduction in supply that needs to be compensated by imported mines; Secondly, steel mills adopt a low inventory and multi batch procurement strategy to maintain a certain level of liquidity in spot iron ore, which provides some support for prices. In terms of inventory, China's 45 port railway ore inventory continues to show a slight trend of destocking, with an absolute value at a high level in the same period of the past three years. In addition, the improved sentiment in the finished product market and the rebound in prices have also had a positive impact on iron ore prices. In summary, it is expected that iron ore prices will remain strong in the short term.

The current spot price of high carbon ferrochrome is 8600 yuan/ton, a decrease of 100 yuan/ton from the beginning of the month. On August 30th, the spot price of high carbon ferrochrome remained stable, while the price of coke, national freight, and electricity remained stable. The spot price of chromite ore decreased by 1-1.5 yuan/ton, and the spot cost of high carbon ferrochrome decreased by 5-14 yuan/50 basis tons. In terms of raw materials, spot chrome ore closely follows the downward trend of futures, while coke maintains weak operation in the short term. It is expected that the short-term high carbon ferrochrome cost will mainly operate weakly and steadily.

The current price of scrap steel is 2070 yuan/ton, a decrease of 10% compared to the beginning of the month. With the arrival of the "Golden September and Silver October", most merchants hold an upward attitude towards the price of scrap steel, and the base has increased slightly to attract more goods, resulting in a significant rebound in inventory and processing volume. In addition, due to the limited social resources of scrap steel and strong price support, even if there is a decline, the drop will not be too significant. Overall, it is expected that the short-term fluctuations in scrap steel prices will be relatively strong.

2. Downstream industry

According to data released by the China Association of Automobile Manufacturers, from January to July 2024, the production and sales of automobiles reached 16.179 million and 16.31 million respectively, an increase of 3.4% and 4.4% year-on-year. From January to July, a total of 3.48 million cars were exported, a year-on-year increase of 25.5%. The car market has entered the traditional off-season, with some manufacturers experiencing heatwave vacations and a slowdown in production and sales pace. The overall market performance is relatively flat, showing a decline on a month on month and year-on-year basis. At present, insufficient demand has become the biggest problem in the automotive market. To promote the long-term stability and prosperity of the automotive market, it is necessary to solve the obstacles in the supply-demand relationship and improve the adaptability between supply and demand. The number of cars in our country has reached 345 million, and once this huge number is activated, it will make a significant contribution to new car sales. Therefore, through policy guidance and structural adjustment, we should develop the two wheels that drive the sustainable and healthy development of the automotive market, second-hand cars and automotive finance. By activating the stock and driving the increment, we can truly activate the endogenous power of the market, thus maintaining the high-speed growth of steel consumption in the automotive industry in the later stage.

Ⅳ Summary

From a macro perspective, the probability of the Federal Reserve cutting interest rates in September has increased, opening up space for domestic monetary policy and further accelerating the pace of demand release. According to the minutes of the Federal Reserve meeting, it is predicted that the Fed will cut interest rates for the first time in September, and there may be another rate cut later this year. Monetary policy will be further relaxed next year.

From a market perspective, in August, the bearing steel market was affected by weak demand, resulting in a wide decline in prices. Some steel mills took the initiative to avoid risks, reducing the production of bearing bars, and shifting inventory pressure to traders. The market saw an increase in low-priced resources and prices continued to bottom out, leading to losses for multiple parties. In September, with mild weather, reduced rainy season, and macroeconomic favorable factors, steel demand is gradually recovering, and downstream order volume may increase month on month.

Overall, although there is still a weak reality pattern in the market, it is expected that the bearing steel market prices will rise in September due to favorable macro factors and supply and demand fundamentals, but the sustainability is limited.