Domestic steel market ushered in the ‘red’. 18 February, Tangshan billet market prices reached 4080 yuan / tonne, up 230 yuan / tonne compared with the pre-holiday period, February 19, Tangshan billet market prices rose again 60 yuan / tonne, to 4140 yuan / tonne. Other varieties of prices rose an average of about 200 yuan / tonne before the holiday. Industry insiders said, by the demand for early release, winter storage prices are higher, high raw material prices and other factors support, short-term steel prices are easy to rise and difficult to fall.

A variety of factors contributing to the rise in steel prices

From previous years, most of the resumption of work after the Spring Festival in the first month after the 15th. This year's initiative to spend the New Year on the spot, some companies resume work in advance, the release of demand to boost steel prices.

As the global economy continues to recover, the effect of multi-country monetary easing policy again enhanced, pushing up commodity prices. During the Spring Festival holiday, overseas commodity prices generally rose. The domestic financial data in January exceeded market expectations, also boosted market confidence. Among them, the new RMB loans in January 3.58 trillion yuan, an increase of 225.2 billion yuan, a record high in a single month; January social financing scale reached 5.17 trillion yuan, an increase of 120.7 billion yuan.

In addition, this year's pre-holiday winter storage price is higher than previous years 400 yuan -500 yuan / tonne, spot traders take the initiative to winter storage willingness is not strong, resulting in winter storage of inventory is mainly concentrated in the hands of steel mills and primary agents. Due to the relative concentration of pricing and cargo rights, the post-holiday steel spot is prone to a rapid rise in the market.

A number of brokerage research report that real estate investment to catch up with the resilience will still support the consumption of long steel, manufacturing industry in the context of the internal and external pro-cyclical recovery rebound, plate consumption or have a bright performance.

Iron ore supply and demand gap or expand

In February, Platts iron ore index oscillated in the range of 155-165, while the coke price maintained at a high level of 2800 yuan / tonne. Raw material prices are high, forming a strong support for steel prices.

Industry insiders pointed out that the resilience of the domestic consumer side, overseas restocking cycle and other factors make iron ore supply and demand in a tight balance for a long time. In addition, the long-term low profits lead to electric furnace steelmaking scale is difficult to rapidly expand, scrap steel on the replacement of iron ore there are limitations.

In 2020, China's foreign dependence on iron ore is still above 80%. Overseas mainstream mines show an oligopoly pattern, the four major mines of iron ore production accounted for about half of global production, shipping volume accounted for 70%. Overseas mines still have pricing advantages under the existing system.

Shen Gang Securities expects the iron ore gap to be 26 million tonnes in 2021, compared with 15 million tonnes in 2020, continuing to expand.

Industry insiders pointed out that the iron and steel industry, as an energy-intensive industry, carbon emissions accounted for about 15% of the country's total carbon emissions, in the capacity replacement policy to increase and ‘carbon peak, carbon neutral’ goal to promote the supply of the iron and steel industry in 2021 will show single-digit growth.