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Since December, with the adjustment of epidemic prevention and control measures, market expectations have improved and steel prices have picked up slightly. Looking ahead to 2023, the Chinese economy is expected to get rid of the unfavorable development environment in 2022, and the steel industry as a whole is expected to be better than in 2022.

The current steel price rose slightly

On November 23, China Steel Association released a 10-day report on steel social inventory monitoring in mid-November 2022. The data showed that the steel social inventory decreased, the relationship between supply and demand tended to balance, steel prices picked up slightly, and the steel market improved. Take Tangshan billet market as an example. As of December 25, the price of Tangshan billet is 3,680 yuan/ton, which has increased by 140 yuan compared with the price of 3,540 yuan/ton in the same period on November 25.

According to the key statistics of iron and steel enterprises in mid-November 2022 by China Steel Association, in mid-November 2022, the daily output of crude steel enterprises in key statistics was 200.2 million tons, with a month-on-month increase of 0.76%; The daily production of pig iron was 1,813,300 tons, with a month-on-month increase of 0.23%; The daily output of steel was 1,969,800 tons, up 2.88% from the previous month. The supply side showed a trend of quarter-on-quarter recovery.

From the demand side, on the one hand, the release of engineering project rush demand enhances the pulling force of the demand side. On the other hand, in November, the Fed rate hike slowed down, the US dollar index fell, commodity prices rose, market confidence tended to stabilize, strong expectations led the Chinese black futures up. Secondly, tax and fee reduction on the steel market early price rebound played a supporting role.

From the cost side, the price of imported iron ore rose slightly recently, the price of scrap steel rose significantly, and the price of coke remained stable. Steel prices are not expected to fall sharply as rising raw material prices have supported them.

Favorable macro policy to help steel market warming up

The Central Economic Work Conference, held in Beijing from December 15 to 16, proposed to effectively prevent and defuse major economic and financial risks to ensure the steady development of the real estate market. Earlier, many places held meetings to study and plan economic work in 2023. Judging from the signals released by relevant meetings, it will remain a priority to continue to expand effective investment next year and continue to focus on the construction of major projects. From December 1 to 3, Henan Provincial Party Committee held a special meeting to study and plan 2023 economic work, which mentioned "continue to deepen the construction activities of '10,000 people to help 10,000 enterprises' and' three batches' projects"; On December 2, the Shanghai Municipal Government held a symposium on economic work in 2023, in which it was mentioned that "we will make solid plans and arrangements for next year's economic work" and "we will strengthen the construction of major projects and promote the development of key areas". It is foreseeable that steady economic growth next year will accelerate the release of "steel demand".

A number of major projects began across the country. According to the "Report on the Implementation of China's Monetary Policy in the Third Quarter of 2022" released by the People's Bank of China, by the end of October, a total of 740 billion yuan had been invested in two batches of financial instruments, effectively supplementing the capital of a number of major projects in the fields of transportation, energy, water conservancy, municipal administration and industrial upgrading infrastructure, and driving the start of major projects in many places across the country. According to incomplete statistics, as of early December, 1,362 projects supported by policy and development financial instruments in 14 provinces had been started. This batch of projects is expected to set off a new construction climax, and then pull the "steel demand" warming up.

In terms of monetary policy, it is expected that there will still be a full or targeted cut in the reserve requirement ratio or interest rate in the New Year. New credit will maintain a relatively high growth level year-on-year, and market liquidity will remain reasonably adequate. It is expected that the main direction of new loan supply is equipment renovation, rigid housing demand, infrastructure construction and other aspects, which will be conducive to increasing steel demand.

More deregulation is expected on the property front. Since the beginning of this year, especially in the second half of the year, various measures have been taken across the country to promote the steady and healthy development of the real estate market. In the middle of November this year, the People's Bank of China and China Banking and Insurance Regulatory Commission stepped in again and put forward 16 financial support measures, including supporting rigid and improved housing demand, "guaranteeing the delivery of housing", etc., to promote the stable and healthy development of the real estate market from multiple perspectives of building, buying and delivery of housing. These measures, for the current real estate market, and future real estate development investment, will have a positive and important impact. Real estate development investment has always been an important area of steel consumption, especially the demand for construction steel. In the New Year, the gradual improvement of real estate development investment growth is bound to bring good news for the steel market.

Improved and adjusted epidemic prevention policies accelerated economic recovery. In December, epidemic prevention policies in many places across the country were significantly improved and adjusted, greatly increasing expectations for stabilizing the economy and injecting strong impetus into steel demand.

Experts predict future market trends

For the overall trend of the steel industry next year, the attitude of Fan Tiejun, president of the Metallurgical Industry Planning and Research Institute, is confident to achieve a stable and good development trend. Fan Tiejun said: "In terms of the development quality of steel enterprises, after six years of policy dividend period, we have solved many problems in the industry and enterprises, such as ultra-low emission transformation, and promote environmental protection, green, intelligent, low-carbon development and process equipment upgrading, the quality of the supply side of steel enterprises is constantly improving. So I think from these two aspects, the overall confidence for next year is relatively big."

For next year's steel prices, metallurgical industry planning and research Institute vice president Xiao Bangguo said, recently steel prices are recovering to rise, comprehensive judgment, next year's steel price level will be better than this year, the profit level of the steel industry will be better than this year. Xiao Bangguo thinks: "The price trend of different steel varieties is not the same. In fact, we this year to medium and thick plate, and to tube billet based iron and steel enterprises benefit is good, this is caused by the impact of our demand side caused by price changes. So we think that changes on the demand side are likely to have an impact on prices."

Ren Qingping, chairman of Shanghai Wubo Steel Structural Materials Co., LTD., in an interview with China Metallurgical News, predicted that before the Spring Festival next year, steel prices will continue to fluctuate slightly, accumulate rebound energy, after the Spring Festival is expected to rise overall.

According to the forecast, in 2023, China's steel demand is 910 million tons, which still remains high, with a slight decrease of 1.1% year-on-year. Overall, steel demand for machinery, automobiles, energy, shipbuilding, home appliances and other industries will show growth.

The situation of steel exports is also getting better. China exported 5.59 million tons of steel in November, up 28.2 percent year on year and 7.9 percent month on month, according to the General Administration of Customs. In the first 11 months of this year, the country exported 61.948 million tons of steel, up 0.4 percent year-on-year.