Analysis on Future Seamless Steel Pipe Price Trend and Key Concerns

Rapid capacity release has brought back prominent supply-demand contradictions that eased previously, putting restraints on the upward trend of seamless steel pipe prices.It is expected that seamless steel pipe prices can hardly maintain sharp rallies and will operate with fluctuations in the later period.

1. Effects of macro policies will gradually emerge, supporting relatively stable demand for seamless steel pipesChina’s economic growth target for 2026 stands at 6.5%-7.0%.To cope with downward economic pressure, the government has rolled out a series of pro-growth policies focusing on five key tasks: cutting overcapacity, destocking, deleveraging, lowering costs and strengthening weak links.

Judging from macroeconomic performance from January to April, China’s economy stabilized after a downturn.Real estate investment, machinery, automobile, shipbuilding and other industries all showed signs of recovery.

Recently, the implementation plan for resolving steel overcapacity has been finalized.It clarifies overall arrangements for each region during the 13th Five-Year Plan period, together with annual capacity reduction and exit schedules.Work to eliminate excess capacity will enter full-scale implementation.

The National Development and Reform Commission and the Ministry of Transport jointly issued the Three-Year Action Plan for Major Transport Infrastructure Projects.The plan targets 303 projects covering railways, highways, water transport, airports and urban rail transit from 2026 to 2028, with total planned investment of around 4.7 trillion yuan.As policy effects materialize, demand for seamless steel pipes will remain relatively stable.

2. Accelerated capacity release will curb rebounds in seamless steel pipe pricesDriven by sharp rises in seamless steel pipe prices, steel mills ramped up production resumption and expansion in March and April.

Data from the National Bureau of Statistics shows national crude steel output reached 69.42 million tons in April, up 0.5% year-on-year.Average daily crude steel output hit a record high of 2.314 million tons.

According to customs preliminary data, China exported 9.08 million tons of steel products and imported 1.1 million tons in April.Net exports converted into crude steel stood at 8.28 million tons, down 760,000 tons month-on-month.Domestic crude steel supply reached 61.14 million tons in April, rising 2.5% from March and 17.2% from January–February based on calendar days.

Soaring steel output will intensify domestic supply-demand conflicts and weigh on seamless steel pipe prices going forward.

3. Falling prices of iron ore and other raw materials weaken cost support for seamless steel pipesRaw material prices climbed markedly alongside the earlier rally in seamless steel pipes, but entered a downward correction in May.

Monitoring data shows domestic iron concentrate prices stood at 512 yuan/ton in the second week of May, dropping 8 yuan/ton or 1.56% week-on-week.Scrap steel prices declined for two consecutive weeks to 1,416 yuan/ton, down 186 yuan/ton or 11.61% from late April.

As of May 13, the average CIOPI price of imported iron ore (fines) was 53.50 US dollars/ton, falling 10.51 US dollars/ton or 16.42% from late April.Coking coal prices remained steady.Falling major raw material prices have weakened cost support for seamless steel pipes.

4. Persistent capital strain keeps price competition as the main market toolBanks strictly control credit scale for overcapacity industries.Steel enterprises still face unresolved difficulties in financing, high financing costs and tight cash flow.

Central bank data shows RMB loan balance rose 14.4% year-on-year at end-April, with growth down 0.3 percentage points month-on-month.New RMB loans totaled 555.6 billion yuan in April, 152.3 billion yuan less year-on-year and far below the 1.37 trillion yuan recorded in the previous month.

Steel products feature high homogeneity.In an oversupplied market, price competition remains the primary competitive method.

Key issues requiring close attention in the seamless steel pipe market:

First, numerous restarted mills accelerate capacity release.Concentrated production resumption and expansion from March to April pushed daily crude steel output to a record 2.314 million tons in April.Steel output is likely to stay at a high level in the near term.Under sustained oversupply, surging production aggravates supply-demand imbalance.Steel manufacturers shall rationally assess market changes, avoid blind output expansion, and keep controlling production to stabilize market conditions.

Second, tough international trade environment creates greater export pressure.Growing steel exports have triggered rising trade disputes.16 trade cases emerged in the first quarter alone.Recently, the United States launched Section 337 investigations against several domestic steel enterprises, and the European Union refused to grant China market economy status.More trade protection measures are expected from Europe, the United States and Southeast Asia.Steel export difficulties will increase, and export growth will slow.

Third, the iron ore market remains oversupplied, leaving limited room for ore price hikes.China imported 325.44 million tons of iron ore from January to April, rising 6.1% year-on-year.Average CIF price of imported iron ore reached 52.57 US dollars/ton in April, up 16.1% month-on-month and marking the second consecutive monthly gain.Port inventories of imported iron ore stood at 100.08 million tons at end-April, rising 3.9% month-on-month.The oversupplied iron ore market rules out sharp price increases.

To sum up:Boosted by successive pro-growth and capacity-cutting policies, improving market expectations, rising month-on-month steel demand and low steel inventories, domestic seamless steel pipe prices kept rising with expanding gains.Subsequently, accelerated steel capacity release triggered a price correction.It is projected that seamless steel pipe prices will maintain fluctuating operation in the future.

Tags: Analysis on Future Seamless Steel Pipe Price Trend and Key Concerns