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Supply and demand depend on capacity release and exports
According to Liu Wenlu, the information director of the website of the organizer “Steel Houseâ€, in 2009, the overall construction steel will be “low supply, low demandâ€, and will adjust itself in response to market price fluctuations; ". The supply and demand relationship in the domestic steel market depends on the release of new production capacity and the extent of export recovery.
“My steel†research center analyst Zeng Shengsheng believes that the current steel market has a varietal differentiation, the plate production capacity is apparently surplus and the price is inverted, the steel companies are forced to no longer simply pursue the plate and tube ratio, some originally only produce high-end products. Large steel mills have also joined the building materials industry, hoping to avoid the loss of coil products and profit reduction through product conversion. It can be expected that the investment in sheet metal will be reduced in the future, and the production capacity of sheet steel will also be limited; investment in long products will increase and the utilization rate of production will increase accordingly.
Steel prices are not optimistic in the short term
The recent news that Baosteel and Anshan Iron and Steel and other large steel companies raised the price of steel products in February 2009 boosted the recovery of market confidence. Some small and medium-sized iron and steel enterprises in North China began to resume production. However, Liu Wenlu believes that the increase in production capacity of large and medium-sized enterprises is not optimistic. The high price of iron ore and the sluggish steel prices are still the major obstacles to the resumption of production by large and medium-sized steel companies.
Liu Wenlu said that although the CIF of imported iron ore in October and November 2008 had fallen from the third quarter, it was still higher than the domestic ore price by nearly RMB 200/t. More importantly, spot iron ore prices from India have fallen to US$80/tonne in November, while Brazilian import agreement iron ore prices remain at US$150/tonne, with small and medium-sized domestic purchases and spot purchases. The cost of enterprises has decreased significantly, while large and medium-sized companies that use long-term mines still face high cost problems. “Although the import long mineral mine price in 2009 is expected to drop by 20% or more, the spot iron ore trade will gradually become mainstream, and the cost advantages enjoyed by domestic large and medium-sized steel companies will be significantly weakened and the market competition will become more intenseâ€.
According to a reporter from Shanghai Steel Sources, which operates online steel trade, an important reason for the recent rise in steel prices is that steel mills and dealers do not have stocks in hand, and a customer’s demand for orders may be magnified by 10 times, increasing supply. In another cycle, prices naturally rise. However, now that the manufacturers have sufficient raw materials and businesses have a lot of steel on the way, it is estimated that steel prices will decline before the Spring Festival.
As for exports, market participants are not optimistic. Liu Yuan, an analyst at the “My Steel†Research Center, believes that in addition to unfavorable reasons such as exchange rates and trade protection, China may become one of the few steel companies in the world with relatively strong demand in 2009. One of the countries, thereby narrowing the gap between domestic prices and international prices even higher than the international market, will become a major factor in preventing steel exports.
At the end of the 2008 “steel salon†attended by more than 40 steel production and distribution companies, such as Baosteel, held in Shanghai recently, the participants stated that the supply and demand relationship in the domestic steel market will sustain the trend of “low supply and low demand†in 2009. In 2009, the prices of domestic steel prices will generally show a low price trend. In the first quarter, low prices will fluctuate and will recover in the second quarter. In the second half of the year, the overall market will experience a rebound and be better than the first half.