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This week saw a rebound in steel futures and a decrease in inventory across five major steel products. However, purchasing sentiment in the market remained lukewarm. Internationally, on September 13, the Russian central bank raised its benchmark interest rate by 100 basis points to 19.00%, while expectations for a U.S. Fed rate cut grew stronger, pushing global gold prices to new highs. Domestically, the social financing scale increased by 21.9 trillion yuan in the first eight months, down 3.32 trillion yuan year-on-year. Government project financing remains tight, and downstream construction is still under financial pressure. Due to a sharp increase in pipe billet prices, seamless pipe mills saw their profits shrink further this week, making it difficult to reduce costs. Orders remained modest, and mill inventories stayed high, leading many mills to lower their prices again. As of September 6, the average price of seamless pipes in 28 major cities nationwide dropped by 41 yuan/ton week-on-week.
Seamless Pipe Prices: According to Mysteel's data, as of September 14, the average price of 108*4.5mm seamless pipes in 28 major cities across China was 4,355 yuan/ton, down 41 yuan/ton week-on-week. Traders have been offloading inventories, causing market prices to weaken.
Raw Material Prices: As of this Friday, raw material prices surged, with Shandong billet prices rising by 130 yuan/ton week-on-week and Jiangsu billet prices up by 150 yuan/ton. The price gap between Jiangsu and Shandong billets slightly widened.
In terms of mill pricing, according to Mysteel's survey of 34 seamless pipe mills, mainstream seamless pipe prices continued to drop this week, with a decline of 50-70 yuan/ton.
Seamless pipe mills faced further profit compression. Using 20# hot-rolled, Ф108*4.5mm seamless pipes as an example, Shandong's sample enterprises reported a profit of 70 yuan/ton, down 40 yuan/ton week-on-week. Given the sharp fluctuations in upstream raw material prices, it's expected that mill profits will remain volatile.
This week, Shandong hot-rolled billet prices increased by 100-120 yuan/ton compared to last Friday, and some of the main seamless pipe mills raised ex-factory prices by 110-120 yuan/ton. The East China seamless pipe market remained stable. Sample mill production saw a slight increase, and both mill and social inventories continued to decline. Despite high volatility in the futures market, downstream demand remained sluggish, and traders primarily focused on steady pricing. With the upcoming holidays, seamless pipe prices in East China are expected to fluctuate within a narrow range in the short term.
Mysteel's nationwide survey of 123 seamless pipe traders shows that this week's social inventory of seamless pipes stood at 660,800 tons, down 10,400 tons week-on-week. Factory inventory at 33 seamless pipe mills was 732,600 tons, down 28,000 tons week-on-week and 31,600 tons year-on-year. Raw material inventory stood at 280,900 tons, down 10,700 tons week-on-week and 1,900 tons year-on-year. Although downstream operations resumed in September, the pace of demand recovery was slow, and mill inventories are expected to remain high in the short term.
Prices: This week, raw material prices rebounded sharply, pushing up costs. However, seamless pipe mills struggled to raise prices, leading to squeezed profits and weak market performance.
Fundamentals: As the market enters September, demand has been slow to improve. Seamless pipe mills continue to prioritize order intake, with supply and demand under ongoing pressure.
Market Sentiment: Despite volatility in both the futures and raw material markets, the price increase has not significantly boosted market confidence, with most clients adopting a wait-and-see approach.
In summary, despite the sharp rise in raw material prices, seamless pipe mills may face pressure to secure orders after the increase. With profits compressed and demand remaining lukewarm, the seamless pipe market is expected to see weak supply and demand dynamics in the short term, with prices fluctuating narrowly after the holiday.
