Monthly Summary: The market price of bearing steel may fluctuate upwards in October

Monthly Summary: The market price of bearing steel may fluctuate upwards in October

Overview: From January to August 2024, the crude steel production of domestic bearing steel increased by 8.01% year-on-year, and the production of bearing steel increased by 7.67% year-on-year. Looking back at the market situation in September, terminal enterprises were cautious in their procurement, and the improvement in market demand was not significant. Prices fell in early September due to weak demand, but in late September, the black market rebounded, and demand gradually rebounded. Market prices remained stable with an upward trend. As of now, the average price of 50mm (continuous casting) bearing steel in China is 4844 yuan/ton, an increase of 30 yuan/ton or 0.8% from the beginning of the month. At the end of this month, with the release of macroeconomic favorable policies, steel mills have successively introduced a new round of price adjustment policies, which may have a certain support effect on the spot market price of bearing steel. Looking forward to October, the market price of bearing steel may fluctuate upwards, but the increase may be smaller than expected.

Ⅰ Domestic production of bearing steel

1. Bearing steel production from January to August 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 August 2024 was 3.399 million tons, an increase of 8.01% compared to the same period last year; The production of bearing steel by major special steel enterprises in China from January to August 2024 was 2.963 million tons, an increase of 7.67% compared to the same period last year.

2. September 2024 Bearing Steel Production: Steel Production Increases on a Month on Month Basis

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 September 2024 was 403000 tons. Among them, 329500 tons of rods, accounting for 81.76%; 73500 tons of wire, accounting for 18.24%.

According to the research sample, it can be seen that the production of bearing steel bars and wires increased in September compared to August. The total amount of bearing steel increased by 14.42% month on month, bar steel increased by 15.33%, and wire rod increased by 10.53%.

3. From January to August 2024, the output of finished products of various bearing steel production enterprises: the total output 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 Steel, and Juneng, accounting for 65% of the total output. The overall production of bearing steel increased from January to August 2024, with production from steel mills such as CITIC, Juneng, Jiyuan, Nangang, Zhongtian, Jianlong Beiman, Laiwu Special Steel, and Magang increasing compared to the same period last year. Production from steel mills such as Dongte Shares, Shijiazhuang Iron and Steel, Benxi Iron and Steel, Jiangsu Yonggang, and Xinggang all declined.

Ⅱ Performance of domestic bearing steel market

The market price of bearing steel fluctuated narrowly in September. At the beginning of the month, the terminal had a procurement plan, but the merchant's operation was more rational, and the market price was relatively stable. In the middle of the month, there was no significant release of demand, market confidence was insufficient, and low-priced sales increased, causing market prices to fluctuate downward. At the end of the month, macro positive information was released, the black market rebounded, and the sentiment of the finished product market improved, driving market prices to start rising. However, the market response was slow, the demand increase was small, and the transactions were average. Overall, it is expected that bearing steel will fluctuate upwards in October, with a smaller increase than expected.

Ⅲ Related market information

1. Raw material prices

In September, the trend of iron ore prices was relatively strong, with a 62% Australian powder forward price index of 101.50 US dollars per dry ton and a PB powder price of 738 yuan per ton at Qingdao Port. In terms of the market, traders are actively shipping, and some traders are optimistic about the post holiday market. Speculative demand has increased, but most traders still focus on shipping; The profitability of steel mills continues to improve, and pre holiday replenishment has been basically completed. Steel mills are still cautious in their procurement. The main reason for inventory reduction is due to the accelerated pace of steel mills picking up goods before the holiday, the recovery of port congestion, and the fact that the total amount of unloading and storage at ports during the cycle is lower than the total amount of outbound goods. 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 8300 yuan/ton, a decrease of 300 yuan/ton or 3.4% from the beginning of the month. On September 29th, the spot price of high carbon ferrochrome remained stable, and the national freight and electricity prices remained stable. The spot price of chromite continued to decline by 0.5 yuan/ton, while the price of blue charcoal increased by 40 yuan/ton. The spot cost of high carbon ferrochrome decreased by 1-29 yuan/50 basis tons. Chromium ore remained weakly stable before the holiday, and the overall price change was limited. Coke maintained a slight increase in price, and the cost fluctuated slightly. It is expected that the cost of high carbon ferrochrome will remain weakly stable in the short term.

The current price of scrap steel is 2160 yuan/ton, an increase of 60 yuan/ton or 2.8% compared to the beginning of the month. In September, scrap steel prices fluctuated and rose, but did not surge as expected. For October, macroeconomic news and favorable policies continue to stimulate the market to some extent. With the traditional peak season for steel demand, steel prices may gradually increase. Coupled with the resumption of production by electric arc furnace steel mills, the demand for scrap steel will increase, and scrap steel prices will also rise slightly following the fluctuation of steel prices. But it is worth considering whether the actual demand for steel can meet market expectations. In the case of strong expectations returning to weak reality, the increase may not be satisfactory. Therefore, overall, it is expected that the scrap steel market will fluctuate and rise in October, and the increase may be smaller than expected.

2. Downstream industry

According to data released by the China Association of Automobile Manufacturers, in August, China's automobile production and sales reached 2.492 million and 2.453 million respectively, an increase of 9% and 8.4% month on month. From January to August, China's automobile production and sales reached 18.665 million and 1.859 million respectively, an increase of 4.5% and 3% year-on-year. At present, the overall operation of the automotive industry is maintaining a slight upward trend, with an increase in raw material inventory and available days. The production progress of enterprises has also improved, and compared to other industries, it remains in a relatively good state. Of course, the current state of the automotive industry is similar to other industries, with the phenomenon of several top companies dominating, and cross-border cooperation has also become very mature. The automotive industry is gradually transforming into a high-tech intelligent product, such as the cooperation between Huawei and BYD, and the strong alliance of top enterprises, which has played a guiding role in the industry to a certain extent. At present, there are also different feedback on the demand for steel in the market, mainly due to the further lightweighting and electrification of commercial vehicles, in addition to traditional household cars, which have to some extent increased the strength and usage of steel. Therefore, it is expected that the overall steel consumption of the automotive industry will increase slightly in October.

Ⅳ Summary

From a macro perspective, the Federal Reserve announced on the 18th that it will significantly lower the target range of the federal funds rate by 50 basis points to between 4.75% and 5%. However, it remains to be seen whether the Fed's interest rate cuts will help the US economy achieve a soft landing, and it will depend on whether lower borrowing costs can stimulate new investment and spending to offset any weakness.

From a market perspective, in mid to early September, the demand for bearing steel market was generally released, and the market price fell below the lowest point of the year. At the end of September, supported by favorable macro information, the black market rose, and steel mills raised the factory guidance price of bearing steel, causing the price to turn from weak to strong, and the sentiment of the finished product market improved. Most traders tend to operate rationally, maintaining stable inventory levels. Downstream parties adopt multi batch procurement strategies, and demand gradually warms up. On the other hand, this also promotes liquidity in the spot market, providing short-term support for prices.

Overall, it is expected that the market price of bearing steel will fluctuate upwards in October, and the increase may be smaller than expected.