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The seamless pipe market in October exhibited relatively weak performance in both supply and demand, leading to a synchronous downward shift in price and profit centers. Domestically, demand during the traditional peak season fell short of expectations, resulting in reduced market confidence and price dips, while relatively firm raw material costs further squeezed mill profits, concentrating inventory pressure upstream. The overseas market, however, remained a bright spot, as seamless pipe exports, despite a slight month-on-month decrease in October, maintained strong year-on-year growth, showing remarkable resilience. Looking ahead to November, existing negative factors will continue to influence the market: on one hand, the resumption of mill production may increase supply pressure; on the other hand, the seasonal slowdown in domestic demand due to declining project commencement in Northern regions will commence. Amidst intensifying supply-demand pressure, the seamless pipe price is generally expected to continue its weak and volatile trend throughout November.
Seamless Pipe Prices Showed Continued Volatile Decline in October
According to Mysteel statistics, as of October 31, the average domestic seamless pipe price (20#, 108*4.5mm) was 4,254 yuan/ton, a decrease of 33 yuan/ton (0.78%) compared to the end of September.
The price center in October clearly shifted lower than in September. As overall peak season demand fell short of expectations, and the market sentiment weakened following the anticipated macroeconomic policies, merchants mostly resorted to price reductions for shipments, leading to an expansion in the price decline during the middle and latter half of October.
Theoretical Profits for Seamless Pipe Mills Experienced a Slight Decline in October
As of October 31, for the example of 20# hot-rolled, Ф108*4.5mm seamless pipe, the average profit for sample mills in Shandong was -80 yuan/ton, a decrease of 10 yuan/ton compared to the end of September.
Due to the relatively firm prices of raw material costs, seamless pipe mill profits were significantly squeezed, narrowing the room for price concessions.
Simultaneously, the relatively weak internal demand led traders to adopt a bearish outlook on the future market, causing market prices to weaken.
As no significant maintenance or production cut plans are anticipated for pipe mills next month, and Northern demand is expected to decline significantly as winter begins, the likelihood of increased supply pressure upstream is high, and mill profits are expected to operate with low volatility.
Billet Price Trends
On October 31, the price of billet in Shandong was 3,380 yuan/ton, a month-on-month decrease of 30 yuan/ton (0.89%).
Billet steel mills saw a decline in supply during October due to production restrictions, with actual output from sample billet mills totaling 1.5008 million tons. Specifically, hot-rolled billet output decreased by 102,300 tons month-on-month, and continuous casting billet output decreased by 23,400 tons.
With previously restricted production facilities gradually resuming operation in November, billet output is expected to increase, suggesting that raw material supply may ease compared to October.
Seamless Pipe Supply Showed a Slight Increase in October
Due to maintenance on some production lines, pipe mill output saw a certain degree of decline in October.
According to Mysteel's survey (32 producers, 110 production lines), the output for the fifth week of October was 366,500 tons, a month-on-month decrease of 9,000 tons. Capacity utilization rate was 73.50%, a month-on-month decrease of 1.8%.
As of the Mysteel survey, no new maintenance or production cut announcements have been made for November, but renewed production restriction news has emerged in the North, potentially introducing some uncertainty to Northern pipe mill production schedules.
Inventory Dynamics
The latest mill in-house inventory was 760,500 tons, a month-on-month increase of 8,800 tons. Social inventory was 678,200 tons, a month-on-month decrease of 9,000 tons.
The North is transitioning from a peak demand season to an off-peak season, prompting mainstream trading enterprises to actively reduce inventory, while Southern merchant inventory changes remain largely stable.
Overall, upstream supply pressure for pipe mills is likely to strengthen next month.
Seamless Pipe Market Transactions Were Relatively Weak in October
According to the transaction volume data from Mysteel's sample seamless pipe trading enterprises (123 sample companies), the average daily transaction volume from January to October showed a year-on-year decrease of 2.52%.
Market transactions were noticeably poor before mid-October, with some recovery noted afterward.
In the absence of clear policy stimulus, and with project commencement declining in the North as winter sets in, domestic demand is highly likely to continue its weak trend next month.
Summary of October Fundamentals: The October seamless pipe market was characterized by: 1) continued declines in price and profit; 2) supply and inventory pressure concentrated on upstream producers; 3) tight cost-side support for prices; and 4) overall weak domestic demand with continued resilience in overseas demand.
November Outlook:
Macro Environment: Most positive news has already been released in October. Environmental production restrictions in the North may become stricter as winter begins, potentially becoming the market's next flashpoint.
Supply: Mysteel's survey indicates that mills that underwent maintenance earlier will mostly resume production in November, suggesting a potential increase in mill supply.
Demand: Entering November, actual project commencement in the North will be limited due to weather, and demand will gradually enter its seasonal off-peak level.
Conclusion: Given the anticipated domestic demand decline and the potential rise in mill supply pressure, the supply-demand and producer-trader stand-off will enter a "deep-water stage." Therefore, seamless pipe prices in November are expected to generally continue a weak and volatile trend.
