In 2023, the production capacity of hot-rolled coils has shown a simultaneous increase pattern in the past two decades. As of the end of 2023, the production capacity of hot-rolled coils reached 29.12556 million tons, with a growth rate of 11.01%. In 2023, the production of hot-rolled coils exceeded that of threaded steel (with a production of 260 million tons in 2023), making it the largest steel variety in China. In terms of annual production trends, the production of hot-rolled coils has been increasing year by year in the past five years, and the growth rate has increased from 2.57% in 2019 to 11.01% in 2023, an increase of 8.51 percentage points.

From the perspective of monthly production changes in 2023, in order to better analyze the historical position of monthly production in 2023, Zhuochuang Information used monthly production data of hot-rolled steel sheets and coils in the past 15 years. By selecting the highest and lowest values of each month, a fluctuation point map of hot-rolled steel sheet and coil production was created, as shown in Figure 2. From Figure 2, it can be seen that the monthly production of hot-rolled coils in 2023 is above the historical highest level. Due to the production growth rate reaching 11.01% in 2023, far exceeding the capacity growth rate by 3%, the capacity utilization rate of the hot-rolled plate and coil steel plant has increased to 84.7%, an increase of 6.11 percentage points from 2022. It can be seen from this that the market s high-yield model runs through the entire year.

The main reason for the high production of hot-rolled coils in 2023 is the achievement of new production capacity, high coil screw deviation, and steel mills switching to hot-rolled coils.

New production capacity put into operation, driving market supply to maintain growth momentum

In terms of the production situation of hot-rolled coils in 2023, a total of 4 new hot-rolled production lines were added, involving an additional production capacity of 10 million tons, with a capacity increase of 3%. Please refer to the "2023-2024 Annual Report on China s Hot Rolled Plate and Coil Market" for the new production capacity of steel mills in the hot rolled plate and coil market in 2023. Due to the fact that the newly added production capacity in 2023 is mainly concentrated in the first half of the year, as the production capacity reaches its capacity, the output will increase accordingly.

The spiral difference of the coil remains relatively high, and steel mills concentrate on spiral production to produce coils

From the perspective of the price trend of coil coils in 2023, as shown in Figure 3, for most of the time, the coil coil difference was positive, and in April and July September 2023, the coil difference exceeded 150 yuan/ton. In this situation, the profits from producing hot-rolled coils in steel mills were more substantial. Driven by profits, it drove steel mills to concentrate on producing threaded steel and switch to hot-rolled coils, thereby maintaining a high level of hot-rolled coil production.

The high-yield model may continue to be maintained in 2024

The market supply situation in 2024 mainly considers the following points: firstly, the intervention of new production capacity will drive the continued increase in production; Secondly, the recovery of real estate is slow, and the related products of hot-rolled plates and coils, such as threaded steel, are difficult to improve. The spiral production of coils may continue to exist; Finally, the advanced rolling process of hot-rolled coils enhances the substitution effect on cold-rolled coils and medium thick plates.

In terms of new production capacity, according to the current statistics from Zhuochuang Information, there are expected to be 5 rolling lines with a total production capacity of 18.7 million tons put into operation in the 2024 hot rolled plate and coil steel plant. The intervention of new production capacity will further increase production.

In terms of related products, industry insiders have always made investment choices by comparing the changes in coil helix differences. However, in recent years, the coil helix differences have gradually expanded, with the highest coil helix difference reaching 310 yuan/ton in 2023. Against the backdrop of slow real estate recovery, the price of rebar has yet to improve, leading to a gradual expansion of coil helix differences. With the expansion of coil helix differences, steel mills have chosen hot-rolled coils with relatively good profit levels for production, thereby driving the market s trend of rebar production to hot-rolled coils. In 2024, the real estate industry has not shown any signs of improvement, and the transition to hot-rolled rebar production may become the norm.

In terms of replacing other products, with the centralized production of ESP rolling lines in the hot rolled plate and coil market, as well as the gradual improvement of rolling technology and market processing technology, cold formed products of hot rolled plate and coil play a good substitute role for cold rolled plate and coil, and hot rolled open plate plays a certain substitute role for medium and thick plate and thin plate. As a primary processed product of sheet metal, hot-rolled coils are more affordable than cold-rolled coils and medium thick plate products. Therefore, in areas where they can be replaced, downstream customers prefer hot-rolled coil products.

Based on the above points, it can be expected that the high-yield model of hot-rolled coils may continue to be maintained in 2024. However, considering the background of crude steel level control and the gradual slowdown in market demand growth, it is expected that the growth rate of hot-rolled coil production may gradually slow down.