August steel price index trend warning report

**August Steel Price Index Trend Analysis Report** Looking back at the steel market performance in July, domestic steel prices experienced a significant surge, marking the largest monthly increase since September of the previous year. As of July 26, the Nishimoto Index closed at 3,660 yuan/ton, rising by 270 yuan/ton from the end of June, representing a 7.96% monthly increase. This upward trend was primarily driven by a slowdown in crude steel production capacity release, weak end-user demand during the off-season, a sharp rise in raw material costs, and improved export conditions. Inventory data shows that as of July 19, the total inventory of five major steel products across 35 major markets nationwide reached 15,605,300 tons, continuing to decline for the 18th consecutive week, with a cumulative drop of 30.16%. While current inventory levels are still 0.98% higher than the same period last year, adjustments in sample surveys at the beginning of the year suggest that the national inventory is now significantly lower compared to the same time last year. In Shanghai, steel stock levels have dropped by 19% year-on-year. The national inventory fell by 7.01% in July, outperforming the 5.11% decline in June, indicating stronger-than-expected demand from the end users. From the perspective of steel mill inventories, data from the China Iron and Steel Association reveals that at the end of July, member steel mills had an inventory of 12.7524 million tons, up 0.58% from the previous month. Compared to the peak of 14.5136 million tons in mid-March, this represents a 12.13% reduction. Despite high steel output since March, mill inventories have consistently declined, showing early success in destocking efforts. In terms of steel production, according to the National Bureau of Statistics, China’s crude steel output from January to June reached 389.87 million tons, up 7.4% year-on-year. In June alone, crude steel production stood at 64.66 million tons, a 4.6% increase over the same period last year. The average daily crude steel output for June was 2,153,300 tons, down 0.33% from May, marking the second consecutive month of decline. For the first half of the year, the average daily crude steel output was 2.154 million tons, resulting in an annual output of 786 million tons. In the production of sub-variety steel, output of steel bars and wire rods from January to June totaled 95.641 million tons and 72.732 million tons respectively, rising 13.1% and 10.9% year-on-year. These growth rates were slightly lower than those recorded in the first five months of the year. In June, the average daily output of steel bars and wire rods increased by 4.66% and 2.5% respectively. According to the China Iron and Steel Association, in the first half of July, the average daily crude steel output of association members fell by 3.84% compared to the previous period. The estimated average daily crude steel output for the country was 2.0830 million tons, down 4.50% from the prior period. This marked the first time since the second quarter that the daily crude steel output fell below 2.1 million tons, reflecting a sharper-than-expected decline. Overall, the government's intensified environmental protection measures have gradually curbed the release of steel mill production capacity, reducing supply pressure and contributing to the recent sharp rise in steel prices. From an import and export perspective, China’s total steel exports from January to June amounted to 30.69 million tons, up 12.8% year-on-year. Meanwhile, steel imports totaled 6.83 million tons, down 1.8% year-on-year. In June, China exported 5.29 million tons of steel, a 1.5% increase from the previous year, but down 120,000 tons from May. Steel imports for the month were 1.08 million tons, down 1.8% year-on-year and 170,000 tons from May. China imported 384.29 million tons of iron ore from January to June, a 5.1% increase year-on-year, with an average import price of $133.23 per ton. In June, iron ore imports reached 62.30 million tons, up 6.86% year-on-year, though the average price dropped by 6.11% from the previous month, reaching its second-lowest level in nearly eight months. The average import price for iron ore in June was $126.8 per ton, down $6.1/ton from the previous month. Overall, in the first half of the year, China’s net crude steel exports reached 25.08 million tons, up 17.5% year-on-year. With a 26.935 million-ton increase in crude steel production, 93% of the increase came from net exports, helping to ease domestic supply pressures. However, the recent sluggishness in exports has drawn attention, and policy support may be strengthened in the coming months. It is expected that Chinese steel exports will remain relatively high in the coming period. Taking into account the environmental protection initiatives, which remain a key focus for the government, some steel mills may see their production capacity constrained. However, with steel prices rising sharply in July, most mills have seen improved profit margins. If environmental regulations do not intensify, steel mills may push for higher production, leading to a potential rebound in domestic crude steel supply. Given the strong export orders in July and August, it is expected that domestic crude steel supply pressure will not significantly increase in August. From the perspective of Shanghai’s investment, fixed asset investment in the first half of the year reached 231.579 billion yuan, up 12.1% year-on-year. Real estate development investment rose 21.7%, while urban infrastructure investment grew by 6.2%. Although new housing construction areas declined, the pace of investment in transportation and municipal projects remained strong, with growth rates of 17.1% and 22% respectively. On a national scale, fixed asset investment increased by 20.1% year-on-year in the first half of the year, although the growth rate slowed slightly. Real estate development investment rose 20.3%, also declining for two consecutive months. Infrastructure investment in railways increased by 21.5% year-on-year, with capital construction investment rising by 25.7%. Despite the slowing investment growth, expectations of policy support remain strong. With the warming up of land transaction data, new construction and investment activities are expected to pick up in the third quarter, boosting investment and new project data. In summary, August remains a traditional low season for consumption, with high temperatures potentially affecting construction activity. However, with the implementation of steady growth policies, including railway investments, urban infrastructure, and energy conservation, demand for construction steel is expected to remain strong. The overall economic outlook remains challenging, with GDP, CPI, and PPI all showing declines. However, the government continues to introduce targeted policies to stabilize growth, which should support steel demand in the coming months. In conclusion, the Shanghai rebar price is expected to maintain an upward trend in August, supported by reduced supply, improved exports, and ongoing policy support. However, as steel mills become more profitable, there could be a rebound in production, adding uncertainty to the market. Based on these factors, it is anticipated that high-quality rebar prices in Shanghai will likely fluctuate between 3,600 and 3,800 yuan/ton in August.

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