Why prices are going up these days? (--- Causes of Price Hike for Prestressed Steel Strand)

Recently, the domestic and export price of prestressed steel strand have continued to rise. Prices have been climbing since late April, and the market price as of May 12 are significantly higher than April. The price increase at this stage is driven by the superposition of multiple factors. The detailed reasons are as follows:

Ⅰ. Rising Raw Material Costs

As a source supplier, we fully recognize that raw material cost is the core driver of this price increase. More than 70% of the production cost of steel strand comes from 82B high-carbon steel wire rods. The current price of wire rods has increased significantly compared with April, directly raising the base cost of steel strand by 60-100 yuan per ton.

Meanwhile, prices of iron ore, coke, scrap steel and industrial electricity have all gone up. Coke prices have undergone two times of increases in April, with a total increase of 150-165 yuan per ton.

In addition, with the national total crude steel control and normalized environmental production restrictions, steel mills take the initiative to reduce output. Raw material inventory remains low and spot supply is tight, which further boosts wire rod prices and pushes up the cost of prestressed steel strand.

Ⅱ. Surging Ocean Freight Costs

Based on our actual export shipping orders, the rise in logistics costs is particularly prominent. Due to the ongoing tense situation in the Red Sea, international shipping vessels avoid the Suez Canal and take detours via the Cape of Good Hope, resulting in longer voyages, higher fuel consumption and severe shipment delays. Shipping companies have additionally charged war risk premiums, peak season surcharges and other fees, leading to a sharp rise in international ocean freight rates. Logistics costs account for a much higher proportion of CIF export quotations, directly pushing up the overall export price of prestressed steel strand.

Ⅲ. RMB Exchange Rate Pressure

As a long-term export supplier, we are deeply affected by exchange rate fluctuations. All domestic production costs are settled in RMB, while export orders are generally quoted in US dollars. The continuous appreciation of the RMB has reduced the actual income of US dollar settlements and greatly squeezed profit margins. To maintain reasonable operating profits and ensure stable supply, we have to slightly adjust our US dollar export quotations to offset the losses caused by RMB appreciation.

Ⅳ. Tight Supply and Demand Pattern

May is peak season for international import and export trade. Domestic infrastructure projects are in full construction, large-scale power grid investments are being implemented, and demand for wind power, mining, hoisting and other downstream industries has fully recovered. Overseas demand is also robust, with intensive launches of infrastructure projects along the Belt and Road, in the Middle East, Southeast Asia, Europe and America, releasing a large number of purchase orders.

In the first quarter of this year, steel strand exports increased by 29.3% year-on-year, reaching 800,000 tons, which greatly diverted domestic production capacity. At the same time, small and medium-sized manufacturers that fail to meet environmental protection standards have gradually reduced production or withdrawn from the market, shrinking the overall effective supply. Manufacturers face tight spot inventory and are strongly willing to maintain and raise prices.

Ⅴ. Geopolitical & Environmental Premiums

From the perspective of suppliers, with the upgrading of national carbon reduction policies and industrial energy efficiency standards, manufacturers need continuous capital investment in environmental protection equipment renovation, carbon emission management and energy consumption upgrading, leading to rigid growth in production costs.

In addition, unstable international geopolitical situations have fueled market bullish sentiment. Purchasers take the initiative to stock up and lock prices to avoid future cost increases, further supporting the market and forming a price trend of rising easily but falling reluctantly.

Summary

The prestressed steel strand price hikes is not caused by a sudden demand explosion, but a combined result of rising raw material costs, peak season demand recovery, surging ocean freight, RMB appreciation, as well as environmental and geopolitical premiums. Current market prices are at a relatively high level after the peak-season rebound, with strong short-term market support. However, from late May to June, the market may face correction pressure due to slowed construction caused by the plum rain season in southern China and slow destocking of steel billets.

As a source supplier, we suggest customers confirm orders and lock prices in advance to avoid cost risks from market fluctuations and ensure stable material supply.