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Plate is expected to usher in reversal opportunity in April
In the aftermath of the 2013 Spring Festival, the plate market experienced a period of fluctuation. According to data from the Lange Steel Information Research Center, as of March 28, the average price of 20mm medium plate in major domestic cities stood at 3,860 yuan per ton. This marked a slight decrease of 5 yuan compared to the end of the previous month. The price of 20mm plate in Handan, represented by Handan Iron and Steel Co., Ltd., was 3,680 yuan, down by around 120 yuan from the end of February. Meanwhile, the Shanghai market, led by Maanshan Iron & Steel Co., Ltd., saw prices drop to 4,000 yuan, a reduction of 70 yuan from the end of February.
Looking at the chart, it's clear that after a prolonged decline in late February and early March, the market entered a consolidation phase with weaker fluctuations by the end of March. Over the past six years, the plate market has reflected the broader challenges within the steel industry. From 2007 to mid-2008, the sector witnessed a historic rebound, with prices soaring from nearly 4,000 yuan to as high as 6,300 yuan. However, this surge was followed by a sharp decline, with prices hitting a five-year low in April 2008. For the next four years, prices remained largely below 5,000 yuan.
Analyzing the historical trend of plate prices in March and April over the past six years, four instances showed sustained increases, while two marked a bottoming out in early April. Based on this pattern, the probability of a market rebound in April 2013 remains relatively high. Furthermore, considering the price levels of medium and heavy plates over the past six years, the current prices in March and April are only slightly higher than those seen during the 2009 economic crisis. Given the improved domestic economic conditions this year, the market's bottom support appears stronger than before.
Taking into account the recent market trends over the past three to four months, it is expected that plate prices will reach their bottom in early April 2013. However, demand for the plate market remained weak in early 2013 due to a lack of optimism in downstream industries. Construction machinery sales in January and February were significantly lower than the same period last year. For example, excavator sales dropped by 46%, loader sales fell by 32%, and bulldozer sales declined by 48%. These figures suggest that construction machinery sales are likely to continue declining in March and April.
In the shipbuilding sector, global new ship orders increased slightly in February 2013, reaching 1.944 million CGT. China maintained its position as the top country in terms of order backlog, with 18.27 million CGT, while South Korea saw a small increase. Despite these numbers, Chinese shipbuilding output declined sharply in January and February, with a 20.9% year-on-year drop in completed vessels. Shipbuilding completion volumes fell drastically, marking the first decline in industrial output since the financial crisis.
Domestic plate inventories were high at the start of the year, but inventory levels began to slow down, reducing supply pressure. As of March 22, total plate stocks in 29 key cities reached 1.668 million tons, up 2.43% month-on-month and 29.98% year-on-year. While market demand started slowly, steel mills maintained normal shipments, and there was no significant production cutback or maintenance, leading to a slow decline in social stock levels. However, traders’ willingness to lock in orders weakened, which helped reduce inventory more effectively.
Additionally, ex-factory prices of domestic plate producers have been declining, weakening cost support for market prices. Among top steelmakers, Shougang and Baotou Steel maintained stable prices, while Anshan Iron and Steel and Hegang saw significant drops. Second-tier steel mills, including Puyang, Wenfeng, Xicheng, and Handan Iron and Steel, also experienced sharp price declines. Under the low pricing of Puyang Steel Works, there was no notable increase in orders, indicating that the plate market still faces downward pressure in the short term.
Based on the above analysis, the supply and demand imbalance in the market persists, and inventory levels are expected to remain stable in the coming weeks. With increasing bottom support and improved resource liquidity, the plate market is expected to see a reversal opportunity in the second half of April.