Recently, the sixth round of coke price reduction has been implemented, and the production costs of steel mills have continued to decline. The demand for section steel in the market has recovered, and prices have shown a trend of stopping the decline and rebounding
The decline in raw material prices has led to an improvement in profits for steel mills!
From January to February 2024, the prices of raw materials such as coke, scrap steel, and iron ore showed a resonance downward trend with the prices of section steel. The profit per ton of steel in steel mills was meager, and most of the time it was in a loss making state. In mid to early March, the decline in raw material prices has accelerated. Specifically, in terms of coke, the sixth round of coke price reduction has recently landed, with two rounds of price reduction within the month, a cumulative decline of 200-220 yuan/ton; In terms of ore, the cumulative decline in PB powder at Rizhao Port (600017) was 120 yuan/ton, an increase of 4 percentage points compared to February; In terms of scrap steel, the average price of 6-8 thick scrap steel nationwide has decreased by about 260 yuan/ton compared to the end of February. Affected by the decline in raw material prices, the production cost of section steel has correspondingly decreased. As of March 20th, the production cost of the long process steel plant was 3486 yuan/ton, a decrease of 295 yuan/ton from the end of February.
However, the decline in the price of H-beams is only about half of the cost decline. According to monitoring data, as of March 20th, the average price of H-beams in the national leading market was 3737 yuan/ton, a decrease of 155 yuan/ton from the end of February. Analysis shows that firstly, due to cautious expectations after the Spring Festival, traders did not conduct winter storage and mostly shipped according to the agreed volume, resulting in lower sales pressure than the same period last year; Secondly, the recent production line load rate of industry-leading steel mills is not high, and the production replenishment is relatively slow; Finally, the recovery of downstream demand for section steel is better than that of other steel varieties. After a decline of about 100 yuan in the first half of the year, there is already ample profit space for early winning orders, and terminal procurement is showing a phased release state. Due to the fact that the decline in steel prices is less than the decrease in production costs, the real-time profit per ton of steel in steel mills has now increased to around 200 yuan/ton.
