Steel prices resume rising traders or usher in a transformation opportunity

Since August, domestic steel prices have rebounded in an oscillating manner. The future trend has become increasingly unclear, and the market has become increasingly sentimental. Whether the steel market can break the basic law of “golden nines and silver tens” and where steel prices will go in the second half will become the focus of current steel companies and traders.

The author learned from the recent seminar on the situation of the steel market in Beijing in the second half of the year that industry experts predict that domestic steel prices will not plunge in the near future, or wait for opportunities to rebound in the rest period, but under the overall pattern of stable demand, limited production, and balanced development. In the future, the trend of steel prices will tend to stabilize.

Steel prices rise again

Recently, the domestic steel market prices have shown adjustments and failed several times.

On September 6, the 1101 contract of rebar was stimulated by energy-saving emission reduction and power cuts by steel mills. The rally was very rapid. It rose to a maximum of 4,592 in one minute in the opening session, then fell back to a high point, maintaining a narrow range above 4500 levels. sort out.

As for the basic trend of domestic steel prices in the short term, Langley Steel's chief information officer Ma Li believes that at the gradual improvement of the macro-policy level, steel prices will not collapse, and the possibility of returning to RMB 3,800/ton will be less. .

In the view of horsepower, the recent trend of steel prices depends on the results of various intertwined factors of good and bad factors. Among them, the gradual improvement in market demand is the biggest advantage. Western development, affordable housing construction, post-disaster reconstruction, and the integration of urban agglomerations are the main stimulus factors.

According to the New Western Development Plan announced by the state in early July, 23 key projects for the development of the western region were newly started in the year, and the total investment scale reached 682.2 billion yuan, which exceeds one-third of the total investment in the past ten years.

“This is not just a tilt of the country’s policy toward the western region, but also reflects the new thinking of the high-level economic layout under the current economic slowdown and the multiple adjustments and macroeconomic regulation,” said Ma Li. More scholars believe that the new round of national stimulus policies for the western region marks the beginning of a new round of stimulus policies in China.

On July 19, the Ministry of Housing and Urban Development proposed that China build 5.8 million sets of affordable housing this year, including low-cost housing, affordable housing, price-restricted housing, public rental housing, and various resettlement houses after shantytown reconstruction. To this end, the central government has allocated more than 600 billion yuan of funds, and relevant policies and measures have been formulated and issued in the form of documents.

Ma Li said that the construction of affordable housing has entered a substantive stage, which will form a direct boost to the demand for construction steel. It is expected that it will boost demand for steel products of 8 million to 10 million tons, which will directly benefit steel prices.

In post-disaster reconstruction, the state will take into consideration the rational planning of regional land use, and involve many problems of long-term disrepair of small and medium-sized water conservancy exposed during the renovation of rural housing and floods. According to estimates, the planned investment for reconstruction after the disaster will amount to several hundred billion yuan, which in turn will drive the demand for 10 million tons of steel. In 1998, the amount of steel used for reconstruction in China was between 3 million and 4 million tons.

In addition, Hainan International Tourism Zone, Shenzhen, Zhengzhou New City Plan, Central Region Wuhan City Circle, Central Plains City Group, Chang-Zhu-Tan City Group, Lancang City Belt, Central Poyang Lake City Group and Taiyuan City Circle Six Cities The integration of the group will also significantly boost the growth of domestic steel demand.

Opposite to the favorable forces, fast-recovery production, high inventory of sheet products, decline in steel exports, and economic data on US stocks and crude oil prices have fallen for two consecutive weeks, becoming the four negative forces that have affected the recent trend of steel prices.

In particular, driven by the recovery of steel prices, the production of steel has increased, which has led to an increase in social steel inventories. Relevant statistics show that domestic crude steel output reached 1.719 million tons in early August, 50,000 tons more than in July; as of August 20, the inventory of 29 coils in 29 key cities across the country reached 5.52 million tons, an increase of 50 percent from the middle of June. Ten thousand tons.

Market outlook or stabilization

The latest data show that in July this year, China's steel industry PMI index was 45.4%, up 1.1 percentage points from the previous month.

“The rebound in PMI indicates that the market started to rebound from the bottom, but the steel PMI is still below 50%, indicating that its recovery is weak.” said Cai Jin, vice chairman of China Federation of Logistics and Purchasing and director of the China Logistics Information Center. Although it is not yet possible to make a judgment of a trend rebound, the policy orientation and market pattern of stabilizing demand, limiting production, and promoting balance have basically emerged.

Cai Jin believes that under the combined effect of the stabilization of demand and limited supply growth, the supply and demand relationship in the domestic steel market will tend to balance in the later period.

From the perspective of demand, although the market demand for steel products has been declining in recent months, it still maintains a relatively high level of growth. In July, the domestic steel demand growth rate reached 19.6%.

"As investment growth, capital supply, stable policy environment, and exports maintain a modest growth, the steady growth of steel demand still has a certain basis." Cai Jin said.

According to statistics, from January to July this year, China’s fixed asset investment increased by 24.8% year-on-year, especially for enterprises that reflect internal viability. The growth rate has reached 31.3% in the same period; investment in new projects has increased by 26.8% year-on-year, accounting for the total number of construction projects. 26% of investment was basically the same as last year.

In the same period, China completed 28.13 million tons of steel exports, a year-on-year increase of 152%. On the one hand, the mild recovery of the world economy is conducive to maintaining a modest growth in China's steel exports. On the other hand, the elimination of export tax rebates for certain steel products will help adjust and optimize the structure of export products.

It is worth mentioning that China's manufacturing PMI has fallen to 51.2% in July, and the non-manufacturing PMI has rebounded to 60.1%. Both of these indicators have fallen by one liter, reflecting the obvious effect of China's macroeconomic policies for production capacity control and structural adjustment. .

While demand is steadily increasing, there is a limit to the growth of steel supply. According to statistics, since the beginning of April, the growth rate of China's steel production has dropped continuously. In July, the growth rate of crude steel production has dropped to 2.2%, and the increase in steel production has been 9.7%.

“Abandoning the impact of the increase in the cost of raw materials such as iron ore, the slowdown in the growth rate of iron and steel production indicates that China’s policy to eliminate backward production capacity and energy conservation and emission reduction is increasing,” said Cai Jin.

In the two-way role of supply and demand, domestic steel stocks tend to decline. According to statistics, at present, steel stocks in the entire society are about 81 million tons, which is a drop of about 10% from the previous month. At the same time, inventory of finished products has also declined.

Steel trader transformation soon

Generally speaking, the current domestic steel traders' business models can be divided into two types: traders with the advantages of steel mills concentrate their products and win with resources and scale; traders with terminal advantages are mainly customers.

As the saying goes, if you buy in the market, it is expensive. If you sell in your city, it is expensive. Regarding how to grasp the fleeting investment opportunities in the steel market, Li Wenjie, deputy general manager of Shougang Xinhualian Electronics Co., Ltd., has its own opinion: “Domestic steel traders do not have to deliberately pursue selling at the highest price, and buy at the lowest point. In order to buy or sell, simply determine an acceptable balance interval."

In Li Wenjie's view, steel traders must not only strengthen steel price, inventory and cost analysis, but also make good use of the spot market and the ** market at the same time. There are spears and shields in order to become Wal-Mart in the steel market.

In fact, with the continuous development of the domestic steel market, traditional steel traders are welcoming a favorable opportunity for transformation.

Cheng Ming-Je, general manager of Lange Iron & Steel Electronic Trading Market, suggested that in addition to guaranteeing the smooth progress of spot trading through guaranteed hedging and intertemporal arbitrage, steel traders should also make full use of the trading rules of the spot market and the ** market to capture the inter-city market keenly. The arbitrage and investment opportunities will increase the transaction scale while saving costs and reducing risks.