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This week saw a significant drop in steel futures prices, with inventories of the five major products continuing to decline and the overall market sentiment remaining bearish. On the international front, U.S. economic data fell short of expectations; August's ADP employment increased by 99,000, the smallest gain since January 2021, strengthening expectations for a Federal Reserve rate cut. Domestically, August's Caixin data was relatively stable, with room for further cuts in bank reserve requirements and stronger policy expectations in the future.
Regarding seamless pipe manufacturers, production remains low, with slight rebounds. Raw material prices are generally weak; near-term profits for seamless pipe manufacturers in Shandong have somewhat recovered, but orders are average, and inventory needs further digestion, prompting most manufacturers to lower their prices. As of September 6, the average price of seamless pipes in 28 major cities nationwide has decreased by 68 RMB/ton week-on-week, with significant declines in most markets.
Seamless Pipe Prices: According to MySteel data, as of September 6, the average price of 108*4.5mm seamless pipes in 28 major cities nationwide is 4,396 RMB/ton, a decrease of 68 RMB/ton compared to the previous week. The main markets have seen varying degrees of decline, with some experiencing drops of over 100 RMB/ton.
Raw Material Prices: As of this Friday, the price of pipe billets in Shandong decreased by 170 RMB/ton week-on-week, while in Jiangsu, prices fell by 130 RMB/ton.
Price Adjustments by Pipe Manufacturers: According to Mysteel's survey (covering 34 sample seamless pipe manufacturers), mainstream seamless pipe prices continued to decline this week, with a decrease of 50-100 RMB/ton.
Seamless Pipe Profit Performance: With the previous sharp decline in raw material prices, theoretical profits for seamless pipe manufacturers continued to recover this week. For instance, in Shandong, the sample enterprise's profit for 20# hot-rolled Ф108*4.5mm seamless pipes was 110 RMB/ton, an increase of 90 RMB/ton compared to the previous week.
East China: This week, pipe billet prices dropped significantly, with Shandong pipe billets falling by 120-150 RMB/ton and Jiangsu by 160 RMB/ton. The ex-factory prices of mainstream pipe manufacturers experienced slight declines, and seamless pipe prices in the East China market fell by 40-100 RMB/ton. There was no price adjustment in the Shanghai market compared to last Friday, while Nanjing saw a decrease of 100 RMB/ton, and Hangzhou dropped by 40 RMB/ton. In terms of pipe manufacturers, sample manufacturers showed slight growth in output this week, with factory and social inventories turning from decline to increase. The downstream project funding situation was poor, and market demand did not show significant improvement. The continuous price decline led merchants to remain cautious, focusing on restocking as needed. In the short term, seamless pipe prices in East China may continue to show a weak trend.
[Inventory Outlook]
According to MySteel's survey of 123 seamless pipe merchants nationwide, the social inventory of seamless pipes stood at 671,200 tons this week, a decrease of 7,200 tons from the previous week. Meanwhile, a survey of 33 seamless pipe production enterprises nationwide revealed that factory inventories were 760,600 tons, an increase of 19,400 tons week-on-week and a decrease of 4,100 tons month-on-month.
Raw material inventories were 291,600 tons, an increase of 11,700 tons week-on-week and a decrease of 400 tons month-on-month. Given the general demand for seamless pipes and recent profit improvement, merchants are proactively reducing inventory, and upstream supply remains low with a slight rebound. Social inventory is expected to continue a slight decline.
[Market Forecast]
Price Perspective: This week, raw material prices fell sharply, and mainstream seamless pipe manufacturers continued to lower prices. Market prices generally continued to decrease, with weakened short-term cost support.
Fundamentals: As the traditional peak season approaches, market demand is expected to improve slightly, with traders restocking as needed. Seamless pipe production may have room for growth, and factory inventories may slightly increase. Overall, the market shows a weak supply and demand dynamic.
Market Sentiment: With the heat in both northern and southern regions subsiding, downstream customers' funding remains tight, and large-scale projects are insufficient. In the short term, traders will focus on sales, intensifying market competition.
In summary, raw material prices have declined significantly this week, and seamless pipe manufacturer profitability has improved slightly. Overall demand remains average, with factory inventories increasing. In the short term, the seamless pipe market is expected to remain weak on both the supply and demand sides. There may be macroeconomic support in the future, but nationwide seamless pipe prices are likely to continue declining next week.
