The rally is over, where lies rationality for seamless steel pipe prices

The seamless steel pipe market has experienced dramatic volatility recently.Prices grabbed headlines and disrupted all previous market expectations.Traders were caught off guard overnight.Calm traders chose to sell part of their stocks and lock in profits.Aggressive players suspended quotations, waiting for further price hikes.

Those holding inventory reaped gains, while traders without stocks regretted missing opportunities.However, the steel billet correction and sharp futures slump last Tuesday evening split market sentiment again.Traders with large inventories grew anxious, and those with low stock levels felt relieved.

All of this reveals a harsh reality.Fragile market sentiment and blind chasing of rallies and slumps have pushed trading beyond rational boundaries.Seamless steel pipe prices need to return to rationality.The question arises: where lies rationality in the current market?

First, let’s review billet and seamless pipe price movements in recent days.It all began with futures hitting the daily limit last Friday.Steel billet prices surged continuously by 120 yuan/ton over the weekend.Steel mills, thrilled by the billet rally, prepared to raise their offers.

The upward momentum accumulated over the weekend triggered widespread price hikes when trading opened on Monday.We witnessed an unprecedented market scene.The national average price jumped more than 200 yuan per ton in a single day, with some regions rising over 700 yuan.In one word: crazy!

All steel varieties across regions saw frenzied price surges.Many merchants withheld sales or suspended quotations.Adjusting prices eight times within one day became commonplace.Traders claimed they had never seen such a rally in two decades.

Seamless steel pipe prices kept climbing early Tuesday.The market believed there was still room for further gains.The national average price advanced another 100+ yuan.However, a warning signal emerged when rebar futures fell back from the daily limit in early trading.Many market participants ignored this hint.

Before Tuesday’s close, steel billets plunged sharply, delivering a heavy blow to overoptimistic traders.Overnight futures extended losses, cooling market enthusiasm rapidly.

When spot trading opened Wednesday morning, seamless steel pipe prices tumbled.Merchants rushed to offload inventories, abandoning the bullish sentiment of the previous two days.Traders cut offers by 50 yuan, then 100 yuan.They prioritized inventory reduction and profit realization regardless of price concessions.The market swung from extreme bullishness to panic selling.

Such wild swings have put market participants under great pressure.We can find reasonable explanations behind this unprecedented price surge.

First, steel billet inventories are less than half the level recorded after the 2016 Spring Festival.Market speculation was fueled by production restriction expectations linked to the Tangshan International Horticultural Exposition, supporting billet price gains.

Social steel inventories decreased by nearly 8 million tons compared with the same period in 2016, offering fundamental backing for spot price rises.

Black commodity futures maintained strength after this year’s Spring Festival, marking the first post-holiday rally since the launch of ferrous metal futures, further underpinning spot prices.

Therefore, the seamless steel pipe rally had fundamental support.Yet such extreme, irrational surges deviated far from market fundamentals.

A correction after the sharp rally was inevitable.Nevertheless, prices are unlikely to drop all the way back to earlier lows.The above supportive factors remain in place.Demand stimulated during this rally also shows that the supply-demand conflict is not as severe as widely feared.

Given this roller-coaster movement of seamless steel pipe prices, several reminders are worth noting.After surging prices, part of the gains will be erased, and steel mills will slow down price increases.

Rational analysis leads to one conclusion:A price correction for seamless steel pipes is not a negative signal.The market will enter a fluctuating range.Prices will stay higher than levels before the rally, yet remain below the recent peak.

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