October and November have always been the peak season for real estate and infrastructure construction, and steel consumption has increased, but steel prices have experienced a rare plunge, with a drop of as much as 1,200 yuan. In December, due to the cold weather in most parts of the north, the construction of the construction site was affected, and the steel consumption was reduced. What makes people puzzling is that last week, steel prices went up. What is the reason for the sharp drop in steel prices in the peak season and the rise in the off-season?

According to data from the National Bureau of Statistics, the domestic crude steel output in October was 71.58 million tons, down 23.3% year-on-year; the average daily output of crude steel was 2.309 million tons, lower than the level of the same period in 2017 for the supply-side reform. In the winter, Tangshan, Handan and other major iron and steel production areas in the north have stepped up air pollution prevention and control efforts.

Tangshan, a big steel city, has launched a level II emergency response to heavy pollution weather at 18:00 on December 3, 2021, and is expected to last until 12:00 on December 10. The specific release time will be notified separately.

In mid-November, Handan released the production regulation plan for key industries from November 18 to December 31, requiring iron and steel enterprises to comply with the requirements of the "Notice on Printing and Distributing the Work Plan for Off-peak Production of Iron and Steel Industry in Heating Season in Hebei Province from 2021 to 2022". Ensure the completion of the first stage of crude steel production reduction tasks.

In addition, the domestic steel social inventory is also continuing to decline. As of the end of November, the total steel inventory in the national steel market in large and medium-sized cities was 10.62 million tons, a decrease of 370,000 tons from the previous week. Among them, the total rebar inventory was 4.76 million tons, a decrease of 280,000 tons from the previous week, a decrease of 6 tons. %, steel inventories fell for seven consecutive weeks. In the absence of a substantial increase in demand, both steel supply and inventories have remained at historically low levels.

Recently, the country has released a series of positive macro news. On December 4, Premier Li Keqiang of the State Council said when meeting with the President of the International Monetary Fund Georgieva: China will continue to coordinate epidemic prevention and control and economic and social development, and implement stable macroeconomic policies. policies to enhance targeting and effectiveness. Continue to implement a prudent monetary policy, maintain reasonably sufficient liquidity, formulate policies based on the needs of market players, reduce RRR in a timely manner, and increase support for the real economy, especially small and medium-sized enterprises, to ensure the stable and healthy operation of the economy.

The central bank and the China Securities Regulatory Commission also stated over the weekend that the spillover impact of Evergrande Group's risk events on the stable operation of the capital market is controllable. stable development.

This series of heavy positives stimulated the steel prices to continue to rise over the weekend. On December 4, the price of common billet in Tangshan rose by 30 to 4,320 yuan/ton. On Saturday and Sunday, most of the domestic steel markets saw increases in rebar, hot coil, medium and heavy plate, profiles, steel pipes, and special steel between 50 and 80 yuan.

As we enter the end of 2021, we must pay attention to the impact of these two aspects on the trend of steel prices: First, near the end of the year, the steel market will be very tight on funds. Not only is the bank's strict lending, but the pressure of payment at the end of the year also makes the steel trade The lack of funds for merchants will put pressure on steel prices. Second, as the opening time of the Beijing Olympics is getting closer, the production limit of northern steel mills will reduce the supply of the steel market to a certain extent.