Steel pipe prices are under pressure before Spring Festival

In November, steel pipe prices fell off seriously on the background of weaker environmental curbs and pessimistic demand expectations for China hollow section tube. Then, the situation of steel pipe market improved and the steel prices rebounded. Looking back on the fundamentals last year, the environmental protection limit , overhaul of blast furnace operation rate and capacity utilization rate continued to decline. In addition, steel production sharply declined, which lead to the reduced supply. On the demand side, the volume of building materials stabilized and recovered, and the terminal demand exceeded expectations. After January this year, it is expected that production restriction will be loosened, high supply will be restored, and inventory will be accumulated. Overall, steel prices will come under pressure.

After September last year, environmental restrictions on production were weakened and air pollution gradually increased. In mid-to-late December last year, air pollution in Tangshan continued to rise. To ensure the completion of annual targets for air quality, relevant departments issued a number of documents one after another, further strengthening the measures of stopping production and limiting production in steel pipe manufacturers and other industries. As a result, the supply of steel in December last year appear a relatively large contraction.

According to a number of production limit documents released by Tangshan, the time to strengthen the control of production limit was up to the end of December last year, mainly in order to effectively achieve peak cutting and downgrade in heavy pollution weather, and to ensure the completion of the annual target of achieving provincial air quality improvement in 2018. According to China’s online air quality monitoring and analysis platform, data show that Tangshan air quality has improved significantly after the intensive control. Based on the completion of its production reduction for cold rolled steel pipe and the end of the intensive control period, the production limit in January is expected to be weakened. On the other hand, as the price of raw materials has been suppressed, the profit of long-process steel-making has recovered to a certain extent, and the willingness of steel mills to stop production is also small. Therefore, regardless of subjective will or objective factors, the possibility of subsequent production limits, production stoppage is smaller and high steel supply will resume.

After entering January this year, the previously appeared demand exceeds the expectation to be unable to continue, the demand for rectangular hollow section will further shrink, and the steel stock will inevitably accumulate greatly.