The industrial logic behind the recent sharp rise

2022-09-23
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The industrial logic behind the recent sharp rise in scrap steel: the electric furnace steel policy is the biggest driver

since December, the scrap steel market across the country has shown an accelerated upward trend. Scrap steel in East China has soared by 400 yuan/ton, and heavy scrap has reached 2200 yuan (including tax), breaking the highest price last year. Even recently, there has been a rush for scrap in the scrap market. The main reason is that the steel mills in the north with a large amount of scrap have limited the production of sinter due to environmental protection, and the amount of scrap added to the long process has been increased. Supported by environmental protection in the north and spot profits, scrap steel rose mainly, and the central and southwest regions were unwilling to lag behind, pulling up one after another to attract the arrival of goods, and there was a fierce rush for high-quality materials. What are the reasons for the continuous sharp rise in scrap and whether it will continue? Let's analyze it from the perspective of market and industrial logic

I. recent scrap market situation in Southwest China

1. Scrap steel market in Sichuan:

recently, in order to prepare for winter storage, Shagang in the South rose by 200, and Yangang in the North followed closely. The resources in the north and South regions are seriously robbed. The leading factories in Chengdu increased the quantity of goods delivered to replenish inventory, and increased continuously; However, the actual effect of attracting goods is not obvious. The main reason is to grab high-quality materials. It is understood that the local foundry's price including tax is about 2500. In addition, Shanxi, which is close to Sichuan, and Shaanxi steel mills and traders rush to the south. Now, Shanxi's high price excluding tax is about, and the price difference with the local electric furnace factory is about 200; It is reported that the freight from Shanxi to Sichuan is about 140, of which there is a profit margin of about 50, resulting in a large outflow of goods. For the local heavy-duty material supply is relatively small, it is undoubtedly more than enough. At present, the local electric furnace factory is constantly operating on the hidden rise of high-quality materials, and the actual transaction price is about higher than the listing price, and the high price of pig iron, steel parts and high-quality heavy materials is about. On the whole, the production restriction of environmental protection in the north is not over, the demand for scrap is still supporting, and the local strength will not change in the short term

2. Chongqing scrap steel market:

on December 20, the low level of all types of scrap steel stockyards rose sharply, and the prices of Yanjia stockyard and Sinosteel Tangjiatuo stockyard with more than 6 thick corners and heavy wastes, pure light stockyard were the mainstream; Xinlianxin and Yongchuan Jinbo stockyards have stable broken raw materials and thick cutting materials. The price rise was mainly driven by the surrounding provinces. The base price of scrap steel in Hunan Xianggang was raised by 150 in the second half of December. There was much bullish sentiment in the market, and the short-term local high was relatively strong

3. Scrap steel market in Yunnan Guizhou market:

choose five of the 50 adulterated elements. With the sharp rise of Shagang by 200 over the weekend, local or adjacent markets have followed suit. However, Yunnan Guizhou region rose slightly later due to its distance from the mainstream market, but it is not impossible to come late. According to statistics, the cumulative increase of scrap steel in Yunnan Guizhou region has been about since the weekend. At present, the mainstream prices in Yunnan Guizhou market are: rebar head yuan/ton, steel plate scrap 2200 yuan/ton, rebar head less than 10 cm yuan/ton, machine pig iron yuan/ton. At present, due to the large gap between finished steel and scrap and the increasing purchase of scrap steel at the end of the year, this wave of price rise is more than that in the short term, and compared with the mainstream scrap steel price in the north, the local price still has a certain gap. In addition, according to the information learned by steel mills, most steel mills are not very satisfied with their own arrival volume, and may increase prices again in the later stage to stimulate the arrival growth

second, the electric furnace policy began to change, and authorities have expressed their positions one after another, indicating subtle changes in the policy

in combination with this sharp rise in scrap steel, it actually began in December and accelerated upward after the middle of the year. Why has the scrap steel price been at a low level for a long time at the time when the steel price was the highest and the gross profit of the steel plant was the highest? Why does today's online promotion of scrap steel not save money so much before it began to rise? We found that the real biggest driver is the gradual change of electric furnace policy

1. Li Shubin: the era of large-scale application of scrap steel in China has come.

on December 17, 2017, at the 2018 annual meeting of the bulk commodity market Summit Forum, the China scrap steel Application Association often believed in Li Shubin that with the deepening of China's supply side structural reform and capacity reduction, especially the rapid withdrawal of "ground bar" capacity, China's steel industry has turned losses into profits since the 13th five year plan, The scrap steel market showed a rebound in price and a good momentum of industrial development. Li Shubin pointed out that in 2016 and the first 10 months of this year, there was a new turnaround in the utilization of waste steel resources across the country, with the total consumption of waste steel and the comprehensive unit consumption of waste steel rising. In the month of this year, the total consumption of waste steel in steelmaking nationwide was 114.51 million tons, an increase of 42.21 million tons year-on-year, an increase of 58.4%. This is the first time that the total consumption of steel-making waste steel exceeded 100 million tons after 21 years after the crude steel output of China's iron and steel industry first exceeded 100 million tons in 1996. It is expected that the total consumption of steel-making waste steel will reach about 140 million tons by the end of the year, marking the era of large-scale application of waste steel in China's iron and steel industry has come. The production of waste steel resources has increased

2. Yin Ruiyu: China's electric furnace steelmaking is ushering in new development opportunities

"after 2020, China's scrap resources will be very rich. It can be said that China's electric furnace steelmaking is ushering in new development opportunities, and now we must be aware and prepared." Recently, the signing ceremony of the agreement on promoting the popularization of ecoarc ecological electric arc furnace between China metal society and Japan steel plantech Co., Ltd. was held in Beijing. Yin Ruiyu, academician of the Chinese Academy of engineering and former Vice Minister of the Ministry of metallurgical industry, pointed out at the ceremony

Yin Ruiyu believes that in 2016, China's EAF steel production accounted for only 7.3% of the country's crude steel production, while the proportion of global EAF steel in the same period was 25.3%; After deducting China, the proportion of electric furnace steel in the world is 42%, including 62.7% in the United States, and more than 20% in Japan and South Korea. With the continuous promotion of strategies such as reducing production capacity, banning "ground bars" and strengthening environmental protection supervision, China's scrap resources and power supply have been further improved, and this change will become more and more obvious during the 13th Five Year Plan period. In 2025, China's scrap steel production will reach 200 million tons - 300 million tons, and it is likely to reach 320 million tons - 350 million tons by 2030, which will have a significant impact on the structural adjustment of the iron and steel industry, technological progress, energy conservation and environmental protection development

3. Luo Tiejun: according to local conditions, correctly guide the replacement of production capacity in the southwest and northwest, and develop short process electric furnace steelmaking. Luo Tiejun, an inspector of the raw materials department of the Ministry of industry and information technology, said a few days ago that in the southwest and northwest regions of China, iron ore is imported against the Yangtze River, and the transportation cost is very high, while local scrap resources, especially scrap light and thin materials, are difficult to digest. After the ban on "ground bars", a large number of scrap resources have been left in the southwest, northwest and southeast coastal areas. We should guide these places to develop short process electric furnace steelmaking through capacity replacement without adding new capacity. At present, the state is advocating that enterprises in "2+26" cities transfer their steel production capacity in the form of electric furnace steel to the southwest, northwest and southeast coastal areas. In this way, China's large steel layout is basically determined

III. Changes in scrap demand side of steel industry in recent years

1 The demand for scrap in the long process increased significantly by 58.4% year-on-year

in 2017, the national crude steel output was 709.5 million tons, with a year-on-year increase of 36.54 million tons, an increase of 5.4%. The total consumption of waste steel in steelmaking was 114.51 million tons, an increase of 42.21 million tons year-on-year, an increase of 58.4%. It is estimated that by the end of the year, the total consumption of scrap steel in steelmaking will reach 140 million tons. After the "ground bar" medium frequency furnace is banned, the demand gap of scrap steel has been fully reflected. In the first 10 months of this year, the unit consumption of scrap steel in the domestic steel industry was 161.4kg/t, an increase of 54kg/t year-on-year, and the scrap ratio was 15.96%, an increase of 4.9 percentage points year-on-year

2. The accelerated implementation of electric furnace projects and demand expectations

(1) orders of domestic electric furnace manufacturers

throughout 2017, orders from large domestic electric furnace manufacturers were very full and in short supply. As of November 2017, 96 enterprises are interested in "transforming China into electricity", and 145 electric furnaces are planned to be put into operation, of which 48 are under construction and 50 have been put into operation

(2) the production of electric furnace steel in the iron and steel industry is less than expected, and the growth rate in the future is very sharp

on the whole, the increase in output of electric arc furnaces in 2017 was less than expected. According to the current tracking samples, as of October 2017, there were 204 sets of electric arc furnaces in production/shutdown nationwide, with a total of 14205 tons of furnaces and a total capacity of about 102 million tons, including 86.6 million tons in production and 15.6 million tons in shutdown. Among them, 106 sets of screw threads, wire rods and steel billets are produced, with a total furnace capacity of 6500 tons and a total capacity of about 46.3 million tons. By the end of October 2017, the re production capacity of electric arc furnace was about 26.5 million tons, of which the re production accounted for about 30%. In 2017, there will be 11 sets of equipment, with a total production capacity of 8.7 million tons. The capacity utilization rate of independent electric arc furnace continued to increase, but the growth rate slowed down. As of December 8, 53 independent electric arc furnace steel mills in China were surveyed, with an average operating rate of 75.04%, up 13.03% from the end of March; The capacity utilization rate was 62.72%, up 28.51% from the end of March. (the current operating rate of enterprises that have started is 91.4%, and the capacity utilization rate is 74.15%). Benefiting from the increase of profit per ton of steel and the advantage of scrap cost, the resumption of production of electric arc furnaces in long process steel plants is also relatively common. Up to now, the electric arc furnace capacity of the long process steel plants that resumed production within the sample statistics year has accumulated about 9.6 million tons, contributing about million tons of output. New electric arc furnaces will be put into operation next month, mainly in the southwest. As of December, the total production capacity of electric furnaces with a clear production plan next year is about 15.6 million, mainly concentrated in the southwest, central China and East China. The new production capacity of electric furnaces is mainly through capacity replacement

the replacement of electric furnace steel capacity in Southwest China accelerated in December, with a new capacity of 16.98 million tons

the capacity replacement announcement of Sichuan Provincial Economic and Information Technology Commission in December showed that all the main equipment to be built in the future will be electric furnaces (2 50t electric furnaces, 3 75t electric furnaces, 8 100t electric furnaces), and the capacity of the construction project will reach 11.49 million tons. In 2016, the crude steel output of Sichuan Province was only 2007.07 million tons, and the crude steel output of Pangang Group, the largest steel enterprise in Sichuan, was also 9.2672 million tons. In the future, the demand for scrap steel will not be large

the latest capacity replacement of Yunnan Provincial Industry and Information Technology Commission in December showed that in the capacity replacement scheme of the transformation and upgrading project of four iron and steel enterprises including Yunnan Desheng iron and Steel Co., Ltd., one 75t electric furnace, three 70t electric furnaces and two 100t electric furnaces were newly built, involving a capacity of 5.49 million tons

IV. determinants of future domestic scrap prices

1 The long process continues to maintain strong demand, and the demand for scrap steel may be tight due to the increase in the operating rate of electric furnace steel

(1) scrap supply: according to the statistics of scrap Association, the total amount of scrap steel resources in China in 2016 was 92.91 million tons, an increase of 7.71 million tons year on year. By the end of 2016 (3) when the cold rolling processing rate of TC6 sheet is controlled at 25 ~ 27%, China's steel reserves have reached 8 billion tons, and the production of social scrap resources has exceeded 170 million tons. It is estimated that by the end of 2020, the steel reserves will reach 10 billion tons, and the production of social scrap resources can reach 200 million tons. The theoretical increase of scrap resources is expected to be 20million tons/year. Of course, imported scrap is also an increase channel that can be considered

(2) use of long process scrap: in 2017, the national crude steel output was 709.5 million tons, an increase of 36.54 million tons year-on-year, an increase of 5.4%. The total consumption of waste steel in steelmaking was 114.51 million tons, an increase of 42.21 million tons year-on-year, an increase of 58.4%

(3) situation and expectation of scrap steel used in electric furnace steel:

according to the statistics of China scrap steel Application Association, in 2016, China's social scrap steel production was 1

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