The recent increase in steel prices should be a normal fluctuation that occurs after the industry returns to a reasonable range. However, a series of market changes that may arise from the rise in steel prices should be prepared and effectively responded to.

In July, the China Steel Association Steel Price Index rose month on month for the fourth consecutive month, and the price of threaded steel rebounded strongly after falling below 4000 yuan/ton in March, rising all the way to over 4500 yuan/ton. The steel industry has finally lived a good day with both quantity and price rising, and supply and sales thriving. Several families are happy, while others are worried. The continuous rise in steel prices has also led to an increase in the costs of some major steel users such as shipbuilding and machinery.

What should I think about the rise in steel prices?

First, we need to see the positive side. Around 2012, the steel industry gradually fell into a situation of overcapacity and sustained downturn, with prices experiencing a continuous decline. Since 2016, China has vigorously reduced production capacity and resolutely cleaned up "ground strip steel", ultimately resulting in a significant increase in the utilization rate of production capacity and a significant improvement in the supply-demand relationship throughout the industry. From a general perspective, the rise in steel prices is a reasonable return and contributes to the long-term development of the steel industry, which is precisely the purpose of promoting supply side structural reform.

Looking at the current situation, although prices have risen and corporate profits have increased, the sales profit margin of steel enterprises has only basically reached the average level of industrial enterprises above designated size, just enough to feed and clothe themselves. Looking ahead, the task of reducing production capacity is approaching its end, and supply and demand are also basically stable. It is difficult to maintain the sustained significant price increase in the later stage.

The recent increase in steel prices should be a normal fluctuation that occurs after the industry returns to a reasonable range. However, a series of market changes that may arise from the rise in steel prices should be prepared and effectively responded to.

In July, the China Steel Association Steel Price Index rose month on month for the fourth consecutive month, and the price of threaded steel rebounded strongly after falling below 4000 yuan/ton in March, rising all the way to over 4500 yuan/ton. The steel industry has finally lived a good day with both quantity and price rising, and supply and sales thriving. Several families are happy, while others are worried. The continuous rise in steel prices has also led to an increase in the costs of some major steel users such as shipbuilding and machinery.