In the first quarter of this year, international steel prices stopped falling and began to rise, showing a stable but upward trend. It is expected that international steel prices will remain relatively stable this year, and there is little possibility of a significant increase.

I. The trend and characteristics of international steel prices in the first quarter

This year, international steel prices showed a comprehensive recovery trend, but the price level was lower than that of the same period last year.

In the first quarter, international steel prices shifted from continuous decline to accelerated recovery, but the price level was still significantly lower than that of the same period last year. The International Steel Market Price Index (CRU), compiled by the British Commodity Exchange, which mainly reflects the price trends of steel in Europe, North America and Asia, had a price index of 132.84 points in the first quarter, a year-on-year decrease of 13.26%, and the price level was basically the same as that in December last year. From January to March this year, the average monthly price index of the international steel market was 130.13, 131.48 and 135.58 points respectively, with a monthly fluctuation range of -1.55%, 1.04% and 3.12%, showing an accelerating recovery trend. The international steel market price in the first week of January dropped to the lowest point since 2004 in March, and by the end of March, the international steel price had risen by 6.88% compared to the beginning of the year, which was also the highest price level since November last year.

The prices of major steel products rose simultaneously. The steel prices in the European market continued to rise. In March, the factory price of medium and thick plates in Europe was between 560 and 600 euros, an increase of 20 euros/ton compared to the beginning of the year. The prices in the United States continued to operate at a high level, and the price level was still higher than that in other markets. By the end of March, the price of cold-rolled coil from the Midwest of the United States was 728 US dollars/ton, 66 US dollars/ton higher than the import price from Japan. This year, the steel prices in the Asian market experienced three processes of stopping the decline, stabilizing and recovering, making it the market with the most intense price fluctuations. The landed price of ordinary billets exported from China to Southeast Asia rose from 360 US dollars at the beginning of the year to the current 420 US dollars, an increase of 16.7%. Some steel mills in South Korea lowered the price of 10mm rebar to 390,000 Korean won/ton in February and raised it to 431,000 Korean won/ton in mid-March, with a price increase of 10.5% in one month.

The prices of flat products and long products rose comprehensively. Since February, international flat products and long products prices have continued to rise, and the current price level has increased by 6.38% and 8.14% respectively compared to the beginning of the year. Since February, the international steel market flat product price index has risen to 138.3 points, the highest level since June last year, and the prices of imported thin plates in East Asia and Southeast Asia have generally increased by 45-70 US dollars/ton. The prices of long products in Europe continued to recover. The delivery price of wire rod for net use in Germany is currently 415 euros/ton, an increase of 20.29% compared to 345 euros/ton in January; the delivery price of rebar in Italy has increased by approximately 60 euros/ton, or 16.21%.

II. International steel prices in the second quarter will show a stable recovery trend

The main reasons for the slight recovery of international steel prices in the first quarter were the recovery of demand, the push of costs, and the inventory being reduced to a reasonable level. However, costs and supply and demand still continue to affect the trend of international steel prices in the second quarter. The costs of raw materials, transportation and energy are high. Since 2002, the prices of steel raw materials such as crude oil, basic metals and iron ore in the international market have maintained an upward trend. The price of crude oil has increased by more than twice, and the closing price of WTI crude oil futures has risen from 25 US dollars per barrel in 2002 to the current 60 US dollars per barrel. The electricity cost in European countries is also rising significantly, with the tonnage steel electricity cost being 35.43 euros in January this year, an increase of 56% compared to 2003, and the gas cost has increased by 100%.

Demand continues to grow. The International Iron and Steel Association predicts that global steel demand will increase by 4.5% in 2006, higher than the 2.7% growth rate of last year. The most renowned steel consulting agency in the world, WSD, recently pointed out that from now until 2015, global steel demand will increase by 3.5% annually. Among this, China will grow by 4-5%, while India is expected to have the fastest potential growth. Apart from China, this country with the largest population in the world currently has an annual per capita steel demand of only 30 kilograms, which is far lower than China's 250 kilograms, Singapore's 600 kilograms, the 400 kilograms per year in the European Union and the United States. If the expansion plans for manufacturing, transportation and power facilities in India are realized, its steel demand will increase from the current 35 million tons to 1-2 billion tons by 2020.

The growth rate of supply has slowed down. In February this year, the crude steel output of the major steel-producing countries and regions worldwide increased by 5.3% compared with the previous year, a decrease of 7.2% compared with January, while the global crude steel output excluding China decreased by 0.3%. The global crude steel output from January to February was 123.56 million tons, a 1% decrease compared with the same period last year. The inventory has decreased compared to last year. After the US steel inventory dropped to its lowest level in six years in November last year, it increased again. In February, the US inventory reached 13.34 million short tons, an increase of 1.8% compared with the previous month, but still a 15.5% decrease compared to the same period last year.

In conclusion, it is expected that international steel prices will stabilize and rise in the second quarter of this year, and the overall price level should be higher than that of the first quarter. The possibility of another sharp increase in prices is also relatively small, because once prices rise, idle production capacity will resume production, increasing supply and thereby creating downward pressure on prices. 

At present, the supply and demand situation of the steel market in our country is better than that of last year, and the steel prices have shown a trend of recovery. In the first two months, a total of 3.67 million tons of steel were exported from our country, an increase of 22.7% compared with the same period last year; the cumulative imports were 2.82 million tons, a decrease of 19.5% compared with the same period last year, and the net export of steel was 850,000 tons, indicating a good development momentum of import and export. However, we still need to closely monitor the changes in domestic and international market prices. At the beginning of last year, when the international steel prices declined, the domestic steel prices in our country rose against the trend, and the prices of some varieties even exceeded the prices in the United States. This led to a situation of a significant increase in imports and a sharp decrease in exports. The export volume dropped from 2.2 million tons in March to around 1.34 million tons in October. Chinese enterprises should learn from last year's lessons, coordinate international and domestic prices, maintain a moderate and balanced import and export volume, and stabilize the price levels of imports, exports and the domestic market.