In the first half of 2024, the external Fed's interest rate cut expectations have been repeatedly disappointed, the external geopolitical situation has become more and more turbulent, and the export performance has exceeded expectations; The domestic market started from the news of the suspension of projects in 12 provinces at the beginning of the year, to the implementation of the real estate financing coordination mechanism in the middle of the year and then to the "three arrows" of the central bank, which confirmed that this year is the tone of the policy city, and the core logic of its operation is the expected reality game, so the steel price trend is led by futures, and the spot follow-up range is determined by the steel mills.
In this context, the ability of the supply side of welded and plated pipe varieties to adjust independently continues to improve, the production control of pipe factories is more flexible, traders after relocation, shrinking the site, the inventory has basically returned to the basic level, but the regional demand differentiation, the inventory-to-sales ratio is still high, the difference from previous years is that the inventory sales volume increased and decreased at the same time, and the role of intermediate traders will amplify the "good and bad" of the market, so the price of welded and plated pipes in the first half of the year was deeply constrained by cost and demand, and the overall price showed a "V" shaped trend.
First, in the first half of the year, the price of domestic welded and plated pipes rebounded weakly after falling
In the first half of 2024, the center of gravity of the welded pipe market will move downward, with an average value of 250-360 yuan (ton price, the same below) compared with the same period in 2023, which is a larger decline than that of the upstream. According to the monitoring data of Lange Steel Network, the price of welded and plated pipes fluctuated downward in the first three months, falling by 200-350 yuan, of which galvanized pipes fell greatly, and the decline was close to that of upstream strip steel, and the trough value appeared on April 1; The last two months fluctuated upward, but the increase was not as high as that of the upstream, and this situation has not been reversed in June. As of June 28, the average price of 4-inch (3.75) welded pipes in the top ten cities in the country was 4,036 yuan, down 295 yuan from the end of December last year, of which 134 yuan fell in June; The average price of galvanized pipes was 4,660 yuan, down 326 yuan from the end of December last year, of which 155 yuan fell in June; The average price of 50*50*2.5 square pipes in the top ten cities was 4,056 yuan, down 268 yuan from the end of December last year, of which 99 yuan fell in June; The average price of 219*6 spiral pipe was 4,396 yuan, down 251 yuan from the end of December last year, of which 90 yuan fell in June (see Figure 1).
Fig.1 Domestic price trend chart of welded pipe and galvanized pipe 4 inch * 3.75mm (unit: yuan/ton)
Narrow inter-regional spreads persist. Taking Tangshan and Nanjing welded pipe 4 inches (3.75) as an example, the average price difference between the two places in the first half of the year was 201 yuan, a slight improvement compared with last year, but it was still far lower than the freight of 200-250 yuan in the two places, and the price difference chart showed that the number of days to maintain the price difference of more than 200 yuan increased, but most of them were in the stage of falling prices, and the sustainability was not strong.
Fig.2 Price difference of 4 inches*3.75mm welded pipe in Nanjing and Tangshan (unit: yuan/ton)
Second, the fundamental surface of the welded and plated pipe is repaired under pressure
1. In the first half of the year, the domestic output of welded steel pipes is estimated to be 28.6 million tons
Statistics from the National Bureau of Statistics show that from January to May 2024, the output of welded steel pipes in mainland China was 23.031 million tons, a year-on-year decrease of 3.1% (see Figure 1 for details), and the increase and decrease did not change much after February. And in June, although the proportion of the impact of the policy increased, but the real estate data showed that the effect of the early bailout did not meet expectations, under the constraints of long and short factors, the adjustment of the production capacity level of the pipe factory will still tend to be small and flexible, and it is estimated that the domestic welded steel pipe output in the first half of the year will be 28.6 million tons, a year-on-year decline.
Fig.3 Histogram of statistical output of domestic welded steel pipes (unit: 10,000 tons)
2. In the first half of the year, the import and export volume of domestic welded steel pipes increased year-on-year
According to the statistics of the General Administration of Customs, the export volume of welded pipes from the mainland reached 509,600 tons in May, an increase of 7.66% month-on-month and a year-on-year increase of 28.92%; The cumulative export volume from January to May reached 2.1519 million tons, a year-on-year increase of 24.83%.
In May, the import volume of welded pipes from the mainland reached 11,100 tons, a decrease of 1.33% month-on-month and a year-on-year increase of 73.1%; The cumulative import volume from January to May reached 44,150 tons, a year-on-year increase of 25.81%.
In May, the net export volume of welded pipes in mainland China reached 498,500 tons, an increase of 7.88% month-on-month and a year-on-year increase of 28.19%; The cumulative net export volume from January to May reached 2.1078 million tons, a year-on-year increase of 24.81%.
Lange Steel Research Center expects that mainland steel exports are still expected to maintain nearly 10 million tons in June. It is estimated that in the first half of the year, the cumulative export volume of welded pipes in the mainland reached 2.65 million tons, and the cumulative import volume reached 55,000 tons. According to the balance of supply and demand, apparent demand in the first half of 2024 will be 11% lower than the same period last year.
Table 1 Measurement of apparent demand for welded pipes in China
Third, the supply and demand pressure of welded and plated pipe varieties increases locally
1. The output of the main welded steel pipe and pipe factories in the Tianjin-Hebei region is estimated to be 7.65 million tons
The production capacity trend of welded and plated pipe factories in the Tianjin-Hebei region has been improved, and the stability and flexibility have been improved. In 2024, in addition to the market failure to rise as scheduled at the beginning of the year and the rapid adjustment of pipe factories to slow down the pace of production, more shipments will be under flexible control during the year. Even if the market bottoms out and rebounds since April, there are still holidays for maintenance during the Qingming Festival and May Day holidays. According to the monitoring data of Lange Steel Network, the output of welded steel pipe and pipe factories in the Tianjin-Hebei region is estimated to be 7.65 million tons in the first half of the year, down 3.26% from the same period last year, but accounting for 26.74% of the total domestic output, a slight increase of 1.49 percentage points over the same period last year.
Fig.4 Trend chart of capacity utilization rate of welded pipes and galvanized pipes of pipe factories in Tianjin and Hebei region
2. The average daily shipment volume of welded and plated pipe factories in Tianjin and Hebei fell by 9% year-on-year
According to the research data of Lange Steel Network, as of June 28, the average daily shipment of welded and plated pipe factories in the Tianjin and Hebei regions in the first half of the year was 26,400 tons, a decrease of 2,700 tons from last year. Among them, only in April and May, the overall market of the steel market turned from falling to rising, and the introduction of preferential policies by pipe factories was slightly better than last year.
Fig.5 Trend of average daily shipments of pipe factories in Tianjin and Hebei region
3. The inventory of welded and plated pipe factories in the Tianjin-Hebei region is slightly lower than last year
According to the research data of Lange Iron and Steel Network, as of June 28, the total inventory of welded and plated pipe factories in Tianjin and Hebei was 568,800 tons, a decrease of 17,800 tons from last year, of which the raw material inventory was not much different. Mainly due to the delay in the production increase of steel mills after the Spring Festival, the passive bearing pressure of welded pipe factories is lower than in previous years; In the first half of the year, the market fell first and then rose, which also led to the rapid adjustment of the production rhythm of pipe factories and efforts to avoid risks; However, in June, the off-season, the output of steel mills did not decrease but increased, and the production capacity of welded and plated pipes as a near-terminal product was controllable, while the pressure from the upstream gradually increased, so the performance of pipe factories in the factory was slightly lower than last year.
Fig.6 Trend chart of total inventory and raw strip inventory of pipe mills in Tianjin and Hebei region
4. The social inventory of welded pipes is higher than that of the same period last year
According to the monitoring data of Lange Steel Network, as of June 28, the total social inventory of welded pipes in China was 914,400 tons, down 2,200 tons from the end of last month, but since April, the overall increase has been gradually higher than that of the same period last year, of which South China and North China have increased significantly, with a year-on-year increase of 12% and 10% respectively.
Fig.7 National social inventory trend of welded pipes and galvanized pipes
5. The shipment volume of galvanized pipe sample enterprises fell by 20% compared with last year
According to the monitoring data of Lange Steel Network, as of June 28, the average daily shipment volume of the national welded and plated pipe market in June was 15,800 tons, down 15% from the end of last month; Although the daily sales level of nearly 20,000 tons in April was a good performance in the first half of the year, the performance of each month was not as good as the same period last year.
Figure 8 Comparison chart of galvanized pipe price and trading volume
On the whole, in the first half of 2024, the apparent demand for welded steel pipe varieties will decline, and the external demand will be stronger than the domestic demand, and the output will decline but the supply and demand pressure will increase locally under the pressure of domestic demand. From a fundamental point of view, the sales volume of welded and plated pipe manufacturers has declined, the inventory has increased and decreased, and the strip production of upstream steel mills is basically the same as that of the same period last year, which shows that the welded pipe varieties need to withstand the pressure of both upstream supply and downstream demand, and it is intensifying compared with last year.
Fourth, the comprehensive benefits continued to decline
According to the monitoring data of Lange Steel Network, the profitability of welded pipe enterprises in the first half of the year has been supplemented by two varieties of welded pipes and galvanized pipes. Taking the price of Tangshan Jinghua 4-inch (3.75) welded pipe and 355 tie strip steel in Tangshan market as an example, the price difference between the welded pipe and the raw strip steel and the price difference between the galvanized pipe and the welded pipe are in a reverse trend. From January to June, the average price difference between welded pipe and strip steel was 169 yuan, higher than last year's 51 yuan, and the average price difference between galvanized pipe and welded pipe was 632 yuan, lower than last year's 98 yuan.
Fig.9 Tangshan welded pipe-strip steel, galvanized pipe-welded pipe price spread chart
Fifth, in the second half of the year, the amplitude of domestic welded steel pipes will be narrow
From May to June, a number of authoritative international organizations and institutions raised their annual economic growth forecasts to 4.6%-5%, which is generally higher than the estimated global economic growth rate.
1. Overseas demand is still an important support
In the first half of the year, the performance of steel exports was significant, but the increment was still in the stock market, the difference is that the replenishment cycle in Europe and the United States may come, stimulating re-export and processing trade, and the trend of high demand is resilient; In addition, overseas central banks may deepen the interest rate cut cycle, which will also support the strong continuation of exports to a certain extent.
From the perspective of welded steel pipe export areas, in recent years, mainland steel pipe export countries have gradually concentrated in Asia, accounting for more than 60%. In the first half of the year, international authoritative organizations tentatively set the Asian economic growth rate in 2024 at 4.5%-4.9%, and the current manufacturing PMI of Asian economies is mostly in the expansion range, which also ensures the resilience of the mainland's steel exports to Asia to a certain extent.
From the perspective of the export varieties of welded steel pipes, the increase in pipes for oil and gas pipelines is large but unstable. From the perspective of oil and gas enterprise development and investment projects, most of them are built in cooperation with countries along the "Belt and Road", although Brazil and other South America are important development areas, but the amount of pipe consumption has not yet been outstanding; In the context of the turbulent overseas situation, the Philippines, a traditional country for the export of welded pipes from the mainland, and Central Asian and Middle Eastern countries with more increments are involved. In addition, the growth rate of welded pipe imports has also increased in recent months, so the actual export growth rate of mainland welded pipes in the second half of the year may be difficult to reach the export level in the first half of the year, turning into a slight increase, and the annual export volume will show a trend of high and low.
2. The expectation of production reduction on the supply side has yet to be implemented
At the end of May, the State Council issued the "2024-2025 Energy Conservation and Carbon Reduction Action Plan", which is expected to regulate the excessive release of finished steel output, from the specific implementation policies of Fujian, Shandong and other leading provinces, different provinces have different regulatory requirements, but from January to May, the mainland's crude steel output fell by 1.4% year-on-year, and if the node is put before the end of 2025, then the overall pressure is relatively small. On the other hand, in 2024, the hot coil production capacity will continue to be put into operation nationwide, and if the supply contraction is still returned to the market for adjustment, that is, the loss will force steel mills to reduce production, then the market will go in another direction. Therefore, how to implement the policy in the second half of the year is more critical.
3. The real estate cycle is still in a weak recovery
The Lange Steel Research Center estimates that the real estate sector currently consumes about 20% of domestic crude steel production. At the same time, real estate also accounts for 20%-25% of the downstream demand classification of welded steel pipes.
Although there are three major projects and whitelist projects of real estate enterprises in progress, the policy of more than 36 months of high inventory cities to suspend the transfer of new commercial residential land, as well as "purchase instead of construction" of affordable housing projects, will lead to new construction to maintain a relatively low level, thereby affecting the repair of industrial chain investment.
On the whole, in the second half of the year, both the macro and the industrial side will have policy disturbances that affect the direction of the steel market, but it is expected that it will eventually shine into reality. In the above context, the positive effect of exports is weakening, and it is expected that it will be difficult to further contribute to the increase in demand; The typhoon and flood disasters in the same period of 2023 will no longer occur in July and August in China, and the current sales level will not continue to decline; On the supply side, whether it maintains the current level or delays the downward trend, it will lead the fundamental pattern in the second half of the year to further improve compared with the first half of the year. Therefore, in the second half of the year, the center of gravity of steel prices is expected to move upward, but subject to the drag of the raw material end, the space is relatively cautious, and the welded pipe varieties are difficult to get out of the unilateral market, and under the pressure of the upper and lower conditions, the price amplitude will be narrow, and the trend will be suppressed first and then rising.
Among them, July is still the off-season for demand, and the middle and lower reaches of the high level are weak to follow-up, and at the same time, according to the seasonal practice of previous years, there is a probability that the high-frequency trading volume will continue to be weak, and there is also a stage rebound driven by the policy, which shows that the fundamentals of welded pipes are still difficult to become the key to boosting the market, and the direction is still in the hands of upstream steel mills. From the point of view of strip steel production, the supply in the northern region is at a high level in the past three years at this stage, and the continuation of the current output level from the production profit of steel mills is a high probability event, even if there is inventory pressure, there is also a certain room for sacrificing profits. Therefore, for the varieties of welded and plated pipes, cost support and supply pressure also exist, so it is expected that the price of welded and plated pipes will have a chance to recover in stages, but there is not much space. (Lange Steel, Li Bo)