The industry generally believes that the situation in 2022 will be even more sluggish than in 2015. Statistics show that as of November 1, the profitability of domestic steel companies was about 28%, which means that more than 70% of steel mills are in a state of loss.
From January to September 2015, the sales revenue of large and medium-sized steel enterprises nationwide was 2.24 trillion yuan, a year-on-year decrease of 20%, and the total loss was 28.122 billion yuan, of which the main business lost 55.271 billion yuan. Judging from the research materials, the country’s monthly production capacity of nearly 800,000 tons is in a state of bankruptcy. Going back to 2022, this year’s steel market seems to have encountered the same problem again. After three years of the bull market, the prices of steel raw materials, such as iron ore and coke, have begun to fall from high levels, and there are signs of entering a bear market. Some friends will ask, will the steel price fall to the lowest point in 2015 in the big bear market of the steel market starting in 2022? It can be answered here that if there is no interference from other major factors, the extremely low price of steel below 2,000 yuan/ton is difficult to reproduce.
First of all, there is no doubt that the downward trend of steel prices has been established. At present, the prices of iron ore and coke, the main raw materials of steel, are still in the downward channel. In particular, the price of coke is still more than 50% higher than the average price over the years, and there is a lot of room for decline in the later period. Secondly, after years of supply-side reform, almost all small steel mills have withdrawn from the market, the concentration of the domestic steel industry has been greatly improved, and the phenomenon of small steel mills will no longer appear disorderly in the steel market.
Last night, the Federal Reserve raised interest rates by 75 basis points again, and the risk of global economic recession has greatly increased. Although commodity prices are affected by the situation in Europe, there is still room for a decline in commodity prices as the demand for industrial products decreases. In the first ten days of November, under the circumstance that the macro fundamentals are very uncertain, the probability of continued weak decline is very high after the price of steel and steel raw materials rebounded from the oversold.
Post time: Nov-04-2022