Why destocking for steel in China and OCTG prices rise
Why destocking for steel in China?
In the past decades, not only OCTG products but also other export goods made in China were known as cheap. That’s because the Chinese manufacturers are greatly affected by the international steel market. It’s transparent for the prices and dimensions of steel pipes, so that everyone in this filed knows the OCTG prices and materials, which results in the harvest of oil are more than the number of sales causing the backlog of inventory. From 2014, you may not believe, the price of OCTG products is cheaper than the cheapest vegetables per kilogram in China.
The plight of China's steel industry has accelerated the transformation of the mode of production of enterprises. In 2015, destocking has become an important measure to solve the burden of China's steel industry. It also becomes a factor in rising OCTG prices.
Result of destocking for steel mills
Inventories, mainly including raw materials, in product, finished goods and spare parts, etc, are initially recorded at cost. In the annual report in 2015, most of OCTG manufactures have been reducing their steel inventory in order to balance between cost and benefit. According to annual reports of the 12 steel enterprise, inventories of Fushun special steel and Hualing steel are still increasing and the other mills are on a downward trend. Among them, Chongqing steel inventory ending inventory amount to 2.78 billion RMB becomes a model of destocking with 65.26% of the decline in inventories, the number of which is 7.99 billion RMB in 2014. As a leader of Chinese steel industry, Baosteel is in the first place with more than 23.5 billion RMB.
| Number | Steel Mill | Inventory(billion) | Rise/Down(%) |
|---|---|---|---|
| 1 | Chongqing Steel | 2.7758 | -65.26% |
| 2 | * ST Eight Steel | 1.3485 | -61.38% |
| 3 | LingGang | 1.0215 | -47.04% |
| 4 | ShaGang | 0.8334 | -36.96% |
| 5 | Three Steel Min light | 0.8470 | -32.55% |
| 6 | MaSteel | 6.0184 | -30.70% |
| 7 | Dazhi Steel | 0.7132 | -28.89% |
| 8 | An Steel | 8.008 | -26.30% |
| 9 | ChangBao Steel | 0.5344 | -21.57% |
| 10 | BaoSteel | 23.516 | -12.30% |
| 11 | Hualing Steel | 8.0224 | 1.48% |
| 12 | Fushun Special Steel | 2.4097 | 13.07% |
China steel industry will continue destock in 2016
According to China federation of logistics and purchasing report which released on April 1, until mid-march, China steel association member-iron and steel enterprise inventory is 13.7552 million tons, which has reduced 868800 tons than February, down by 5.94%. Compared with last year, it has reduced 359.58 tons, down by 20.72%.
The influence of OCTG prices
Simultaneously, stock market is also reduced with OCTG supplier reducing inventory. Compared with same period of last year, in March national steel market inventory reduction of 3.9 million tons, which is significantly lower than the level of same period last year. Side-effect of steel enterprises’ destocking has passed to steel prices. In the past three months, OCTG prices rebound has risen more than 30%, during the course of nearly 10 years of OCTG prices rebound, risen percentage is only lower than July 4-36% in 2009.
OCTG prices will be gradually increasing with the destocking of the steel. TICO will make more affort than ever in offering professional services in accordance with the manufacturer's recommendations and industry best practices.
