Steel and cement stocks are in high need of urgent solution

Hebei Tangshan is one of the larger production centers in the domestic steel industry. It is known as “The National Steel Industry sees Hebei and Hebei Iron and Steel (000709, shares it) to see Tangshan”. In the first three quarters of this year, the operating conditions of Tangshan's steel industry were not optimistic. Due to the significant decline in steel prices and weak demand, a large number of Tangshan private small and medium-sized steel mills stopped production. Since the beginning of October this year, the operating conditions of Tangshan Iron and Steel Company have improved, but it has not lasted long.

Dong Bin, business director of Tangshan branch of Zhejiang Property International Trading Co., Ltd. believes that this year he encountered the worst steel prices since his career. Dong Bin told a China Securities Journal reporter that Tangshan’s steel mills had been destocking in the first three quarters of this year. By September, the initial stocks were basically digested. In October, the company began to make significant inventory inventories. “In September this year, the billet fell to a low of 2,700 yuan per ton. This price is definitely losing money. By October, the billet price had risen to 3,300 yuan per ton. The steel mill in Tangshan has almost fully opened its production capacity in October.”

However, the sign of restocking just started has not been consolidated. In November, the price of steel fell again, and the billet price fell to a price of 3030 yuan per ton. Tangshan's steel mills have begun to control production. "At present, the profit space is very limited, but as long as it is not a significant loss, we will maintain production. However, now that the stock has returned to high levels, we expect that future demand will hardly match current production capacity."

The cement industry and the steel industry are very similar. After experiencing the destocking cycle in the first three quarters, there have been signs of restocking in the fourth quarter of this year. The restocking of the cement industry has not been able to continue. Since November of this year, the price of cement has fallen again, and the cement industry has once again taken the initiative to limit production.

Chen Bailin, president of China Cement Association Digital Cement Network, told the China Securities Journal that since September, inventory in the cement industry in East China and South China has dropped significantly, and sales have rebounded significantly. “August, many small cement plants were still in production. At that time, not only the inventory was high, but also the price of cement fell to the lowest level in 10 years. By September, the demand for cement increased significantly. The small-scale cement plants that had been shut down have resumed production.”

However, since November, cement stocks have once again been high, and cement prices have also declined from October. Chen Bailin said that at present, cement is at a more appropriate price. "Manufacturers can make certain profits, but prices do not have room for growth. After all, the industry's production capacity is obviously oversupply."