Cost support tends to strengthen short-term steel prices or narrow margins

Last week, the domestic steel production cost continued to rebound, and the increase increased. According to the calculation model of Fubao Information, as of September 21, the production cost of major steel products in China rose by 89-91 yuan/ton from the previous Friday, or by 2.22% to 2.76%.

From the factors that affect the cost of steel production:

1. Raw material market: At the beginning of last week, some transactions in the raw material market saw a slight improvement, but the willingness of most steel mills to effectively purchase short-term was still insufficient. Especially in the latter half of the week, the raw material transactions were obviously weak, and prices continued to weaken after a narrow rise. Among them, the domestic mine section rose, the imported mine continued to pull up and then weakened, the steel billet rose first and then fell, scrap steel rose first and then suppressed, and coal char narrow fluctuations. As of September 21, the average price of domestic refined iron fines rose by RMB 19/ton on a week-on-week basis, and the average price of imported ore increased by RMB 75/ton on a week-to-week basis.

2. Shipping market: Last week, due to the recovery of international commodities, the freight rate of sea-hull vessels rose sharply. By September 21, the freight rates of Brazil, Western Australia-China Capesize-type ships rose by 16.01% and 14.42%, respectively, on the BCI index. The increase was up to 31.56%. Driven by this, the international dry bulk market was active overall. However, due to the sustained downturn in the Atlantic market, the BPI index is still unilaterally down. India's import demand for coal supports the steady shipping of India-China Panamax shipping.

At the beginning of last week, the market was led by the buying atmosphere, and the turnover improved slightly. However, with the price falling in the second half of the week, the turnover returned to dull and the business cautiously waited for the atmosphere to increase. Overall, last week, the steel society stocks continued to decline. The market supply and demand have not been fundamentally improved. Some mills raised their ex-factory prices and maintained higher production capacity. In later periods, the increase in steel production was still larger than the increase in demand; near the end of the month and the end of the quarter, the pressure on merchants' funds increased sharply; Weakness, period screw into shock consolidation. Taken together, the short-term steel price is expected to operate in a stable or narrow range.