At the end of October, steel prices began to hit bottom and rebound after a round of decline, ushering in a strong upward trend. The futures price of rebar has exceeded 4000 yuan/ton, and other categories have also seen varying degrees of increase. The high price of steel has made screw dealers sigh. So what is the reason for the current round of steel price increase?
1、 The reasons for the increase in steel prices
1. Rising prices of raw materials such as iron ore
Since the beginning of this year, without significant changes in the market supply and demand fundamentals, the price of iron ore has risen for three consecutive months, reaching $117.70 per ton in March, an increase of nearly 30% from the end of last year. Some varieties of iron ore even soared to $130 per ton. Under strengthened regulatory control, there was only a brief adjustment in iron ore prices in April and May of this year. However, since the end of October, there has been a significant increase in the price of imported iron ore, which has remained at a high level above $125 per ton.
In addition to iron ore, the futures price of coke has also reached a new stage high. On the supply side, the situation of domestic coal mine safety inspections is still relatively severe. The Shanxi coal mine accident has once again caused production stoppages, and some large coke enterprises have successively announced production restriction plans, with most coal types showing an upward trend.
2. National macro policy promotion
The central government announced that it would issue an additional 1 trillion yuan of treasury bond in the fourth quarter of this year, while raising the fiscal deficit from 3% to 3.2%. The signal significance of issuing trillions of treasury bond is far greater than the scale itself, which greatly boosted market confidence. It can be seen that the country is determined to promote steady economic growth. The steel market has come out of pessimism, and the steel price has started the third wave of strong expectations this year.
In addition, entering November, multiple macroeconomic policies of the country have gradually been implemented, and the central bank has used various financial tools to reduce the pressure of capital costs. A new round of land auctions has been launched in many cities, driving more construction projects to start and increasing the demand for steel.
3. Environmental factors and other factors affect the production of some steel enterprises
Entering winter, heavy pollution weather is intensifying in various regions, and many regions are beginning to strengthen environmental supervision. Especially in Hebei province, which is a major producer of steel, strict supervision of severe weather pollution has been implemented. Due to the impact of ecological environment emergencies and heavy pollution weather warnings, Handan City has launched a Level II emergency response for heavy pollution weather, affecting the production of some steel enterprises and reducing steel supply. Market sentiment has been driven, and the demand for replenishment by merchants has been released, which is beneficial for the trend of steel prices.
2、 Will steel prices continue to rise in the future?
This round of steel price increase is influenced by multiple factors such as domestic and international economic environment, supply and demand relationship, and cost pressure. Will steel prices continue to rise in the future?
At present, relevant departments have noticed the situation of "artificially high" iron ore prices and have taken action to crack down on price speculation. On the 23rd, the National Development and Reform Commission announced that in response to the recent rapid increase in iron ore prices, the National Development and Reform Commission, the State Administration for Market Regulation, and the China Securities Regulatory Commission jointly held a meeting to strengthen the supervision of iron ore futures and spot linkage. It is expected that iron ore prices will return to normal levels in the future, and steel prices are also likely to fall due to upstream influences.
In addition, with the arrival of winter, steel companies are entering a seasonal off-season, and downstream demand is average, so the possibility of steel prices continuing to rise is unlikely.
3、 The impact of rising steel prices on the fastener industry
At present, this round of steel price adjustment has significantly affected the fastener industry. On the one hand, the procurement costs of enterprises have increased, leading to increased operational pressure; On the other hand, the increase in product prices leads to a decrease in market competitiveness and an increased risk of customer churn. According to the 2023 financial report data, the gross profit of fastener products of several listed companies in the industry is currently less than 20%! The market was originally not good, but now it's even worse. What measures can fastener companies take to cope with pressure?
4、 Strategies that fastener companies can adopt
1. Optimize procurement strategy
Finding alternative raw materials or suppliers: By finding alternative raw materials or suppliers, we can reduce our dependence on a single raw material or supplier, alleviate the pressure of price increases, and establish a stable supply chain cooperation relationship. We can also establish a stable supply chain cooperation relationship with suppliers and reduce procurement costs through long-term agreements, bulk procurement, and other means.
2. Product price increase strategy
By raising prices, pressure is transmitted to downstream enterprises. Negotiate product price increases with customers and share cost pressures while maintaining product quality and service. At present, many fastener companies have issued announcements to increase the prices of finished products. However, in the fastener industry, price increases inevitably lead to some customer loss.
3. Enterprise Upgrade Strategy
In the long run, to avoid the impact of fluctuations in raw materials on enterprises, it is necessary to improve the competitiveness of products: improve production processes, reduce production costs; Developing high-end products to increase added value; Adapt to government policies and promote enterprise transformation and upgrading. This is also an inevitable trend in the entire Chinese fastener industry, but there is still a long way to go to truly achieve it.
4. Expanding customer acquisition strategies
As costs rise and profit margins decrease, developing new customers becomes the key to maintaining a company's profitability. Exhibitions, e-commerce, as well as popular short videos and social media, are all good ways to expand customer acquisition.
Post time: Nov-28-2023