Losses Amplify! Down 2.5 Trillion Yuan Year-on-Year! Will Steel Prices Fluctuate Again?

Special Focus

The central bank reported that the renminbi loan increased by 11.14 trillion yuan in the first five months. By sector, household loans rose by 889.1 billion yuan, of which medium-to-long-term loans increased by 859.8 billion yuan; corporate (and institutional) loans increased by 9.37 trillion yuan.

PART 01 Industry News and Analysis

01 Socail financing increased at a slower pace

In the first five months of 2024, the cumulative increase in social financing scale reached 14.8 trillion yuan, down by 2.52 trillion yuan year-on-year. Among them, the increase in RMB loans to the real economy was 10.26 trillion yuan, a decrease of 2.1 trillion yuan year-on-year.

Analyst Perspective: Starting in April, the domestic financial data statistics methodology has been altered. Over the next year until April of the following year, the year-on-year and month-on-month adjustments will be completed, at which point we will see new and objective data along with the corresponding year-on-year and month-on-month ratios. Currently, domestic economic demand is notably insufficient, and under the demand slack season, the market continues to fuel expectations of interest rate cuts and reserve requirement reductions.

02 Arc Furnace Steel Mill Suffers Increased Losses

Last week, the average profit for independent electric arc furnace steel mills in the construction steel industry was -177 yuan/ton, a decrease of 29 yuan from the previous week. The valley electricity profit was -56 yuan/ton, reaching a low point over a year, down 24 yuan/ton from the previous week. The losses for electric arc furnace steel mills are intensifying, and it may be difficult to recover in the short term.

Analyst Perspective: High temperatures and heavy rainfall have led to a decrease in scrap steel processing base production, with a significant drop in steel mills' incoming shipments. The dual-tight supply and demand situation is evident, and the resilience against price falls remains. Currently, the trend of steel prices is weak, and there is still a slight downward room for scrap steel prices in the short term, but a deep fall is not expected.

03 May Automotive Sales Growth

In May 2024, car sales reached 2.417 million units, up 1.5% year-on-year. From January to May, the total production and sales were 11.384 million and 11.496 million units, respectively, showing year-on-year increases of 6.5% and 8.3%. The growth rates in production and sales both narrowed by 1.3% and 2% compared to the previous month.

Analyst Perspective: China's new energy vehicle production has remained the global leader for nine consecutive years, with a 33.3% year-on-year increase in new energy vehicle sales in May. By 2025, the global automotive steel market is expected to reach 16.6539 million tons, continuously releasing steel demand and benefiting the trend of steel prices.

PART 02 Market Overview

Steel Mill Price Adjustments: Mixed Trends of Increase, Decrease, and Stability

As of June 15th, according to the data from the Information Research Institute of Zhonggang Net (WeChat Official Account: Zhonggang Net), a total of 9 steel mills adjusted their prices today, including:

Increased by 3, accounting for 33%, with a price adjustment of 20-30 yuan/ton.

Reduced for 3, accounting for 33%, with a price adjustment of 10-20 yuan/ton.

Tied at three, accounting for 34%.

PART 03 Futures & Billet Market Dynamics

June 11-14 - The black series experienced slight weakness with rebar closing at 3637, down 18; hot rolled coil closed at 3806, down 7; coke closed at 2331, up 79; iron ore closed at 827.5, down 12.

June 11-15: Tangshan Qian'an's general billet resources dropped by 10 yuan to 3,400 yuan per ton, including tax, for ex-factory sales.

June 11-14 - Subpar Performance (Zhonggangwang Large Database)

PART 04 Steel Price Forecast

Lately, the market has seen some intermittent rebounds, yet spot prices remain stable with a slight downward trend. On Friday, raw material inventory slightly increased, with downstream terminal demand struggling to absorb, compounded by an unstable foundation for economic recovery, which may lead to continued fluctuation in steel prices in the short term.Steel prices are expected to remain stable or decline today.