The steel market in the first half of 2022 experienced an unprecedented surge, driven by global monetary easing and domestic factors like "carbon peak and carbon neutrality." Steel prices embarked on a sharp upward trajectory. The price of seamless steel pipes overall showed a significant increase, with the peak occurring in early May. By the end of June, the year-on-year price increase for seamless steel pipes approached 40%. This year, both the supply and demand for seamless steel pipes were released earlier than in 2020, with the supply peaking and then falling in the first half, and demand following a similar trend. Looking ahead to the second half, it is expected that both supply and demand will experience a short-term low-frequency fluctuation before gradually recovering, and the prices of seamless steel pipes in the second half are still worth looking forward to.
I. Review of Seamless Tube Market in the First Half of 2022
(1) Review of Price Trends in the First Half of 2022
The price trend of seamless steel tubes in the first half of the year showed an overall upward trend with fluctuations, with significant increases. In May, the price of seamless steel tubes experienced a sharp "V" shape rise and fall. By June, the price of seamless steel tubes (20#, 108*4.5mm, unless otherwise specified) had returned to a reasonable range. According to Mysteel, as of June 30th, the average domestic price of seamless steel tubes was 6,149 yuan/ton, up by 980 yuan/ton from 5,286 yuan/ton on January 1st, an increase of 1,672 yuan/ton year-on-year, with a growth rate of 37.3%. The highest price point for seamless steel tubes in the first half of the year was in early May, with the average price reaching 7,012 yuan/ton. From the perspective of historical seamless steel tube prices, unlike other more robust steel varieties, the price performance of seamless steel tubes was relatively weak, with the price peak in 2021 still significantly below the peak in 2008.
(II) Review of Fundamental Conditions in the First Half of 2022
Supply Review: Due to effective control of the domestic疫情 at the beginning of the year, the domestic economy recovered strongly, and domestic demand surged. On the other hand, seamless tube supply dropped early last year-end, and tube factory inventories were low at the beginning of the year. The mismatch between supply and demand in the short term prompted rapid resumption of seamless tube factories, with capacity utilization and production already reaching high levels in the post-Lunar New Year week. Subsequently, as tube factory profits declined, the supply-demand mismatch improved, and tube factory supply began to fluctuate and contract. By the middle of May, a sharp drop in orders for tube factories due to falling prices led to a rapid decline in supply, with increasing inventory pressure and a swift downturn in tube factory supply.
There have been shutdowns of mining and selection enterprises in Shandong, Shanxi, Hebei, and other regions, resulting in limited market supply of domestic mineral resources. Furthermore, the market price of iron ore in China is already low, and the overall market price is strongly supported by cost factors. Therefore, it is unlikely that Liaocheng Seamless Thick-Walled Square Pipe Factory will continue to lower its prices.
The North China market is stable with a slight upward trend. The Tangshan market is driven by the rising prices of imported ore, with some manufacturers increasing their iron ore quotations. However, most steel enterprises maintain low-volume purchases, and only a few steel mills with tight inventories slightly raised their iron ore procurement prices, which has a limited impact on the overall market. The trend of rising prices at Liaocheng Seamless Thick-Walled Square Pipe Factory is not obvious. The Northeast market is slightly active, with traders showing increased enthusiasm in seeking goods, mainly influenced by the rise in external markets. However, most steel enterprises have good iron ore inventory conditions and are not strongly inclined to increase prices for purchases, so the upward trend in the local market has been put on hold. The East China market has seen a slight upward movement.
Liaocheng Seamless Thick-Walled Square and Rectangular Pipe Factory's market is seeing frequent low-price resources, and with the factory's market sentiment remaining pessimistic, it is expected that the mainstream trend today will continue to decline and adjust. The steel prices at domestic Liaocheng Seamless Thick-Walled Square and Rectangular Pipe Factories are accelerating their decline, and the adjustment efforts in the market have been significantly intensified compared to yesterday.
With the continuous decline in futures prices, weak spot transactions, and further intensification of market pessimism, domestic steel prices have broken previous lows and hit new lows in succession. Intermediary operators have seen a decrease in enthusiasm, with downstream buyers only purchasing as needed, leading to a drastic reduction in overall trading activity. The 2100 yuan per tonne level for upstream billet prices is not the end of this adjustment. The downward adjustment in prices for finished products such as rebars, high lines, hot-rolled coils, medium and thick plates, and cold-rolled sheets will continue, and the bottom has not yet been reached. It is still advised to exercise caution in the market. The downward adjustment of forecasts for medium and thick plate manufacturers has reached 2350 yuan, and for hot-rolled coils, it has reached 2650 yuan. This bearish sentiment will further expand the space for steel prices to continue falling.
