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Overview Due to a significant increase in costs, traders stocked up heavily before the holiday, leading to a noticeable rise in seamless pipe prices in mainstream markets. Pipe factory profits underwent wide adjustments. On the macroeconomic side, the issuance of new domestic special bonds accelerated, and multiple banks lowered mortgage rates, creating a favorable environment and boosting market expectations. As of October 12, the average seamless pipe price across 28 major cities in China saw a significant increase.
[Prices] Seamless Pipe Prices: According to Mysteel’s inventory data, as of October 12, the average price of 108*4.5mm seamless pipes in 28 major cities was 4,644 RMB/ton, a week-on-week increase of 301 RMB/ton. Prices rose across all major markets this week.
Raw Materials: As of this Friday, raw material prices saw strong increases. Shandong billet prices rose by 160 RMB/ton week-on-week, while Jiangsu billet prices increased by 70 RMB/ton, narrowing the price gap between Jiangsu and Shandong.
Pipe Factory Price Adjustments: According to a Mysteel survey of 34 sample seamless pipe factories, prices fluctuated this week, with some factories raising prices by 100-200 RMB/ton.
[Profits] In terms of profits, since the price increase of finished pipes lagged behind the rise in raw material costs, pipe factory profits were squeezed. For example, for 20# hot-rolled Ф108*4.5mm seamless pipes, sample companies in Shandong reported a profit of 500 RMB/ton, a week-on-week decrease of 150 RMB/ton, while in Jiangsu, profits were 560 RMB/ton, down 100 RMB/ton from last week. The fluctuation in billet prices recently has been significant, and it is expected that factory profits may undergo wide adjustments.
East China Region Review: This week, hot-rolled billet prices in Shandong and Jiangsu dropped by 80-100 RMB/ton week-on-week. Some major seamless pipe factories in Shandong adjusted ex-factory prices by -50 to -150 RMB/ton week-on-week. In East China's major markets, seamless pipe prices increased by 200-220 RMB/ton week-on-week. For example, in Shanghai, seamless pipe prices rose by 200 RMB to 4,640 RMB/ton; in Nanjing and Hangzhou, prices increased by 200 and 220 RMB respectively, reaching 4,470 and 4,660 RMB/ton. The adjustment range expanded compared to last week. Pipe factory production slightly decreased, and factory inventories continued to decline, while social inventories slightly increased. Despite a significant rise in raw material prices, market prices followed suit more slowly, and traders remained cautious in replenishing inventories, still harboring concerns about a potential price drop. After the National Day holiday, market transactions slightly improved, and traders have a cautiously optimistic outlook for October. However, this week's price increases lacked sufficient support. In the short term, seamless pipe prices in East China may fluctuate and tend to weaken.
[Inventories] According to Mysteel's survey of 123 seamless pipe traders nationwide, social inventories of seamless pipes reached 695,600 tons this week, up by 15,100 tons week-on-week. The survey of 33 seamless pipe manufacturers showed that factory inventories stood at 724,900 tons, a week-on-week decrease of 2,400 tons, and a month-on-month decrease of 35,700 tons. Raw material inventories were 282,900 tons, down 500 tons week-on-week and down 8,700 tons month-on-month. Before the holiday, a sharp rise in steel prices led to concentrated restocking, reducing factory inventories as they transferred to social inventories, which now await consumption.
This week, seamless pipe production was 309,200 tons, a week-on-week decrease of 1,400 tons, and a month-on-month increase of 3,900 tons. The capacity utilization rate was 67.19%, down by 0.3% week-on-week and up by 0.85% month-on-month. The operating rate was 52.46%, a week-on-week decrease of 3.28%, and a month-on-month decrease of 0.82%. As billet prices surged too quickly, some billet-processing factories reduced their stockpiles, leading to a decline in the operating rate of sample factories.
[Market Outlook]
Prices: This week, raw materials fluctuated widely, and after rising on Saturday, prices retreated. In the short term, there is significant uncertainty in cost-side prices. Seamless pipe costs remain high, with strong cost support, and rising factory prices are pushing up market prices.
Fundamentals: Before the holiday, traders heavily replenished their stocks, leading to a notable increase in social inventories, which now await consumption. Meanwhile, new incoming materials are priced higher, and old stock still has profit margins, causing market participants to prioritize selling old stock at discounted prices. Downstream companies continue to face financial constraints, and overall sales remain moderate.
Sentiment: Demand in September fell short of expectations, and downstream buyers’ financial pressures have not been fundamentally resolved. However, by the end of the month, macroeconomic stimulus improved trader sentiment slightly.
Conclusion: In summary, it is expected that seamless pipe prices across China may fluctuate within a narrow range next week.
