The Strictest Environmental Restrictions Come In Advance Steel Prices Rre Rising

Steel prices have reached record highs.On August 21, the price of domestic construction steel continued to rise.The average price of the 25 major cities in the country was 4,637 RMB/ton, which was 22 RMB/ton higher than the previous trading day.The price of semi-finished steel used to produce steel has also risen all the way.On August 20, Tangshan billet prices rose by 20 RMB/ton to 4,110 RMB/ton, the highest since mid-October 2011.

Analysts told reporters that since July this year, the heat season, low demand, but steel prices did not fall back but rise, rebar prices have risen to 4500 RMB/ ton, futures have also grown to a six-year high.The reason why the steel market is not weak and the prices rise again and again.It is due to the increase in pollution control efforts in various places.The production restrictions in steel mills happens from time to time, such as Tangshan, Handan, Xuzhou, Changzhou and other places. 

Analysts said the production restrictions caused in low inventories directly. According to the survey statistics, the current stock of social and steel mills has been lower than the same period last year.Price is strong and the market is optimistic. Analysts said the market had high expectations for environmental protection restrictions on production in fall and winter  in Beijing,Tianjin,Hebei,Yangtze River Delta and Fen-Wei plains.Optimistic expectations have also driven steel prices higher.Therefore the current price of steel not only reflects the current environmental production restrictions, but also reflects future expectations.

Production restriction instruction in steel industry come again .It is understood that the "Action Plan for Comprehensive Control of Air Pollution in Autumn and Winter in Beijing,Tianjin,Hebei and Surrounding Areas(consultation draft)" has been released recently. In the plan, the steel, coking, casting industry carry out off- peak production partially.In key cities such as Tianjin, Shijiazhuang, Tangshan, Handan, Xingtai and Anyang, the production capacity of steel in the heating season is limited to 50 %, and the proportion of production in other cities is limited to no less than 30 %.Compared with last year, Tianjin, Xingtai were added to be the key cities which steel production capacity is limit to 50 % in this year .

As a steel town,Tangshan has already made an important measure. Due to the poor air quality in Tangshan City, the off-peak production in the heating season maybe carried out in advance on September 1st.The production in steel enterprises is limited not less than 50 % and other industrial enterprises increase the percentage of suspension of production.By the end of October in 2018, all steel companies in Tangshan city had reached ultra-low emission levels, production must be stopped where the standards were not met.The limited production of blast furnace rose from 15-20 % to 25-35 % in Wu An steel in Handan Hebei Province.

In fact, the rise of price in the spot market, in response to steel mills continue to raise factory prices.Steel mills control the market, prices was risen unilaterally.According to the latest inventory data released, inventory in steel factory continues to decline, and it is estimated that steel mills will be fixed prices.The billet price was firm in short-term, and price of billet rose to 4,500 RMB/ton in Tangshan,a new high in the year.In the construction steel and steel sheet market, steel prices have generally risen, rising by an average of 100 RMB/ ton a week.

It is known the stock of scrap steel in mills in various places has not grown in the month, but recently the prices of products have been strong, which has set off a rise in the price of scrap steel once again.In August, the demand for steel gradually increased, but the scope of environmental protection continued to expand,the maintenance of blast furnaces in many places was frequent,and the output of molten iron was reduced. More scrap steel was needed to produce more steel.The price of scrap iron was firm, and the resource of scrap steel became shorten in the market .

Judging by the strictest Production Restriction Instructions,is there much chance of a rise in steel prices?It now appears that the demand for steel in the second half of the year remains high, which may be related to the investment plans for major projects in the second half that have been announced in many places. At the beginning of August, the China National Railways Corporation confirmed that "the fixed investment in the railway in 2018 will return to more than 800 billion", while the original plan was only 732 billion.

However, the analysts said the current steel price already reflects the expectations for environmental production limit and rise in demand in future.In other words, the current price was the future price."We should learn from last November. " said the analyst. At the end of October last year, the price of steel was less than 4000 RMB/ton. In just one month, the price of steel rose to 5,000 RMB/ton. Then it fell below 4,000 RMB/ton from this outrageous price in a month.This hurt the market badly.

The limited production caused the price jumped, but the production was up too .Journalist survey found the production of crude steel and steel is still growing significantly and hitting a new high, in spite of the impact of environmental restrictions on production, Supported by demand ,from the second quarter, steel companies have been actively increasing production to reserve products . A head of a steel company in Tangshan told reporters.