The steel industry, which has been in the doldrums for many years, suddenly encountered a rebound in demand at low inventory levels. Industry insiders expect that as steel orders improve, the bottom of steel prices will continue to rise.

Yesterday, the China Federation of Iron and Steel Logistics Professional Committee released the steel industry PMI index in March, which was 49.7%, up 0.7 percentage points from the previous month and rebounded for four consecutive months, reaching the highest point since May 2014.

Among the main sub-indices, demand recovery is the most eye-catching. In March, the new orders index for the steel industry continued to expand, up 2.4 percentage points from the previous month to 53.3%. The index also rose for four consecutive months and reached its highest point since May 2014, indicating that the current domestic steel market demand continues to rise, and steel mill orders have increased significantly.

From the perspective of the downstream consumer market, the demand for steel in the “Golden Three Silver Four” is now in the peak season, especially in the real estate and automobile markets. At the same time, however, due to tight capital and debt pressure, the pace of resumption of production by steel companies is still slow. In March, the steel industry production index rose only 0.3 percentage points from February, reaching 49.8%.

Demand expansion, but resumption of production is slow, steel industry inventories fell. After the end of last month, the steel industry's finished goods inventory index rebounded again and again, and it contracted again in March, at 37.7%, down 7.1 percentage points from the previous month. The index has been below the 50% stagnation line for 8 consecutive months, indicating that the current steel mill destocking effect is obvious.

The fly in the ointment is that the rebound in steel prices has caused domestic steel prices to exceed overseas steel prices, resulting in almost 10% of steel exports being “frozen”. In March, the new export orders index for the steel industry continued to fall by 9.3 percentage points to 36.9%, the lowest point in nearly 14 months.

Demand for downstream terminals in the steel market, a look at the railway, a look at real estate. Among them, the sales in the housing market in January-March were very hot. In March, the transaction area of ??new commercial residential buildings in 15 second-tier cities increased by 160.6% from the previous month, up 96.4% year-on-year, the highest monthly level in more than five years; the transaction area of ??new commercial residential buildings in 11 third-tier cities increased by 44.0% from the previous month, up 37.1% year-on-year.

The Fed’s rate hikes have slowed down, and the dollar has fallen sharply, pushing up commodity prices and helping steel prices rebound.

In addition, the Tangshan World Garden, an important city for steel production, has an operating cycle of nearly six months, and the mandatory emission reduction measures taken during the key control period of the 33-day major event have led to the expected reduction in production.

The Steel Logistics Professional Committee of the China Federation of Logistics and Purchasing believes that the domestic steel prices will continue to show a trend of strong, volatile and difficult to fall. With the gradual recovery of steel mills' operating rates, steel exports are blocked and the property market in first-tier cities is tightening. The supply and demand situation in the domestic steel market is likely to change gradually, and the space for steel prices to continue to rise will be limited.