Since this year, China's steel cost has increased. According to the market monitoring data of Lange steel network, on April 5, 2019, the national steel cost index was 106.9, up 9.3% over the same period last year, and 9.5% over the previous low (December
28, 2018). The increase of steel cost is mainly caused by the increase of raw material and energy price.
Looking forward to China's steel production cost in 2019, the above raw material and energy prices will continue to increase.
First, the price of high-grade iron ore is rising
In recent years, due to a variety of factors, the international market for high-grade iron ore, in fact, does not present a serious oversupply situation.
As a result of the dam break and chain reaction in Vale at the end of last year, tens of millions of tons of iron ore (high grade, the same below) were reduced in supply, resulting in a tight supply-demand relationship, thus driving up the offshore price by a large margin.
Goldman Sachs therefore raised its three-month iron ore price forecast from $70 / T to $80 / T and six-month iron ore price forecast from $60 / T to $70 / T. Citibank even expects iron ore prices to rise to $100 a tonne in the middle of this year.
Considering the weak iron ore inventory of domestic iron and steel enterprises, the continuous increase of iron and steel production, the increase of high-grade iron ore dependence and other factors, China's demand for high-grade iron ore will increase in the future, so as to support its high price operation.
According to the market monitoring data of Lange Iron and steel network, on April 10, 2019, the price of 61.5% Australian powder in Rizhao Port (600017) was 680 yuan / ton, 33% higher than the previous low (November 28, 2018), 54% higher than the same period last year, while the price of Proctor's iron ore index increased by 43% and 49% respectively. Affected by this, the average import price of iron ore in the first quarter of this year has reached 79.16 USD / ton, up 7.2% year on year.
In particular, from a month on month basis, the average import price of iron ore in February 2018 was at a periodical peak, then turned down to the middle of the year, but this year is a reverse upward trend.
It can be predicted that if there is no major accident in the future, the price of high-grade iron ore in the whole year should be higher than that of the previous year, which does not exclude the possibility that the price will continue to be strong in the next few months.
The second is the sharp rise in oil prices
Since h beginning of this year, oil prices have increased significantly. At present, the oil price in the international market has been above $60 per barrel. It is estimated that in the first quarter of this year, the price of China's imported oil and gas rose by more than 20% year on year, which led to multiple increases in the price of domestic refined oil.
Due to the influence of geopolitical factors, it is expected that oil prices in the international market will run at a high level this year, which also does not exclude the possibility of continuing to rise.
Driven by this, the price of imported oil and gas in 2019 will be much higher than the previous year's level, which makes the domestic price rise correspondingly. The rise of oil and gas prices at home and abroad will also have a certain linkage or support effect on the production prices of other domestic energy sources, such as coal, coke, electricity, etc.
The steel industry belongs to the high-energy consumption industry. This year, the rise of oil and other energy prices will certainly affect the production and logistics costs of the whole steel industry chain, which will lead to the increase of the total cost.
It can be seen that driven by the above two important factors, the cost of steel in China will tend to increase this year.
The author believes that the cost of steel will be greatly increased, which will have two impacts on the steel market:
One is to produce a certain steel price supporting effect. If the supply and demand balance or is tight, it will also promote the market to rise.
Second, reduce the profit level of steel industry;
It is worth noting that the cost increase of smelting raw materials and other costs this year seems to exceed the price increase, and the gap is expected to increase in this year. In this case, the profits of steel enterprises are bound to be eroded.