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In July, high temperatures persisted in both the northern and southern regions, leading to average market transactions and a decline in the average price of seamless pipes. The supply pressure on seamless pipe factories was relatively high, and traders were not particularly eager to stock up. As we move into August, the extreme heat in northern markets is gradually subsiding, potentially improving downstream operations. With limited room for further declines in raw material prices after significant drops earlier, seamless pipe prices are expected to experience narrow fluctuations. In the following sections, I will summarize the basic market conditions of seamless pipes in July and provide a brief forecast for August's price trends.
According to Mysteel, as of July 31, the average price of seamless pipes (20#, 108*4.5mm, unless otherwise noted) in China was 4,649 yuan/ton, down 86 yuan/ton from the national average price of 4,758 yuan/ton on June 28, a decrease of 2.34%. Compared to the same period last year, prices dropped by 119 yuan/ton, or 5.33%. The market demand significantly weakened in July, with clear off-season characteristics. Traders' sentiment was poor, and the noticeable decline in upstream raw material prices led to a weaker trend in domestic seamless pipe prices.
Seasonal Analysis of Seamless Pipe Prices (Unit: yuan/ton)
In mid to late July, the significant drop in raw material prices led to a substantial reduction in prices by mainstream pipe manufacturers, resulting in a noticeable contraction in theoretical profits for seamless pipe factories. As of August 20, the theoretical profit for seamless pipe factories in Shandong, using 20# hot-rolled steel and Ф108*4.5mm seamless pipes as examples, was -90 yuan/ton, a decrease of 110 yuan/ton compared to the previous month. After a brief rebound at the end of July, profits at Shandong pipe factories significantly declined.
In July, raw material prices dropped, with Shandong billet prices reported at 3,310 yuan/ton as of July 31, a monthly decrease of 230 yuan/ton. Recently, billet prices have stabilized, but pipe manufacturers' enthusiasm for adjusting billets remains moderate. Traders have actively reduced inventory, placing considerable pressure on pipe manufacturers to secure orders. Moreover, the drop in upstream raw material prices in July exceeded that of finished products, making it difficult for seamless pipe prices to rebound in the short term. However, with the substantial reduction in costs, factory profits are expected to improve as we enter August.
Profit of Seamless Pipe Manufacturers in Shandong(Unit:yuan/ton)
Price of Shandong Pipe Billet(Unit：yuan/ton)
In July, orders for pipe factories significantly weakened, leading to substantial supply pressure. According to Mysteel's latest survey (covering 33 production companies with 122 production lines), the production volume was 315,800 tons, a slight decrease of 0.05 million tons from the previous week but an increase of 1.5 million tons compared to the same month last year. The capacity utilization rate was 68.62%, down 0.11% from the previous week but up 3.26% compared to the same month last year. The operating rate was 52.46%, remaining flat week-on-week but up 3.28% compared to the same month last year. In-factory inventory stood at 768,900 tons, down 0.07 million tons from the previous week and 0.64 million tons from the same month last year.
By the end of July, the inventory at pipe factories had slightly decreased, and the enthusiasm for production had somewhat diminished. However, overall inventory levels remained high. Moving into mid to late August, demand in northern regions may improve, potentially alleviating some of the pressure on pipe factories.
Seasonal Variation in Inventory of 32 Seamless Pipe Factories (Unit:10,000 tons)
Seasonal Variation in Production of 32 Seamless Pipe Factories (Unit:10,000 tons)
In July, the decline in seamless pipe prices was accompanied by a noticeable weakening of market transactions. According to data from Mysteel's steel pipe research group, the sample trading volume for seamless pipe trading companies (124 sample companies) showed that the transaction volume in the fourth week of July was 11,937 tons, a decrease of 1,334 tons compared to the third week's 13,271 tons. The average daily transaction volume in July was down 14.33% compared to the same period last year. Overall, market demand in July was relatively weak, and transaction levels were generally low.
Mysteel Sample Trading Companies' Daily Average Transaction Volume of Seamless Pipes (Unit: tons)
The performance of the seamless pipe market in July can be summarized as follows:
Average Prices Declined, Factory Profits Contracted: The average price of seamless pipes decreased, leading to a significant contraction in profits for pipe manufacturers.
Slight Decrease in Production, Continued Inventory Pressure: Production levels slightly declined, but inventory pressure at factories remained.
Weakened Market Transactions, Clear Off-Season Characteristics: Market transactions were generally weak, with clear signs of off-season demand.
Supply: Pipe factories are experiencing average order volumes, with production levels slightly decreasing by the end of July. Currently, the output from sample pipe factories is lower than the same period last year, and competition among mainstream manufacturers is intensifying. In August, seamless pipe production may see slight fluctuations, with traders actively reducing inventories, resulting in social inventory levels remaining around the mid-range.
Demand: The transaction volume in July significantly declined, leading to poor market sentiment. However, as the extreme heat in the northern regions gradually subsides in mid to late August, market transactions may improve.
Raw Materials: In July, billet prices saw a sharp decline, and the futures market for black commodities rebounded, indicating signs of stabilization in raw material prices. In August, raw material prices are expected to fluctuate within a narrow range.
Conclusion: In August, demand in the northern market may improve, and traders are likely to continue reducing inventory, with a generally cautious approach to restocking. However, inventory pressure at pipe factories remains relatively high for the year. Therefore, the price of seamless pipes in the domestic market is expected to fluctuate within a narrow range.
