[Outlook] Chinese steel prices are likely to increase in October

In October, steel prices are expected to trend up. 1) From a macroeconomic perspective, under the current downward pressure on China’s domestic economy, on September 24th, statements from PBOC, NFRA (formerly CBIRC), and CSRC articulate the recent 0.5% reduction in reserve requirement ratio and the release of 1 trillion yuan of liquidity into the market, the interest rate of existing housing loans to drop to the interest rate level of newly issued housing loans, to study innovative financial vehicles supporting A-shares and stabilization funds, etc. Monetary policy has been strengthened, and fiscal policy is expected to continue intensifying, boosting market expectations for an improved market sentiment. 2) From the industry perspective, as of September 20th, the inventory of the five key steel products decreased by 10.8% YoY, among which the inventory of construction steel decreased by 30%. As the gap between steel supply and demand remains, inventory may continue to decline in October, despite potential production ramp-up driven by improved profitability. 3) From the raw materials perspective, the pre-holiday inventory of raw materials, particularly iron ore, has significantly declined this year compared to last year, with only 6.51 million tonnes purchased before the National Day holiday (Oct 1st-7th), down from 14.79 million tonnes last year. This lower pre-holiday stockpiling, coupled with the expected post-holiday demand surge, is likely to push raw material prices higher and offer robust cost support to the steel market. 4) There is a divergence between long and flat steel products. Inventory levels for long steel products remain low and are likely to keep declining, leading to a worsening shortage in the spot market. Meanwhile, inventory accumulation of flat steel products is expected to stay at a high level. In this case, price increases for long steel are expected to outpace those for flat steel. As of September 24th, the production profit of rebar was 150 yuan/tonne, and the production loss of flat products was recovered to -150 yuan/tonne.

Overall, the steel market is expected to trend up in October, with average prices continuing to rise compared to September. Construction steel will outperform flat steel products.

[Risk Warning] 1. Steel consumption is expected to decline beyond expectation. 2. Overseas economic downturns are likely to be repeatedly priced in.

Notes:

(1) Bullish (indicated by "+"), divided into three levels, strongly bullish (+ + +), moderately bullish (++), and bullish (+);

(2) Bearish (indicated by "-"), divided into three levels, strongly bearish (- - -), neutral bearish (- -), and bearish (-);

(3) Neutral (indicated by "+ -")

Mysteel published a series of articles analyzing the outlook for the steel market and its raw materials in October, backed by charts from Mysteel DataBuffet. ?????????? ???????? ???? ?????????????? ?????? ???????? ?????????? ???????? ??????????????'?? ????????????????: ?? https://infogram.com/chinas-steel-market-poised-for-golden-october-1h0r6rzeexzpl4e?live

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