Steel price building phased bottom

At present, the contradiction between supply and demand is still prominent in the steel industry, and production capacity will remain at a high level in the short-term. Due to the slow progress of destocking and the downward adjustment of prices by the dominant steelmakers, the domestic steel market will remain at the bottom of shock phase in June.

The construction of steel prices at the bottom of the phase After the “Jin Sanyin IV” was soaked, steel prices continued to stumble in the “Red May”. According to monitoring, on May 22, the domestic composite index for steel products was reported at 130.95 points, 0.21% lower than the previous trading day, and almost equal to the low of September 7 last year (124.3 points).

Last week, the average price of construction steel in the country continued to fall. Among them, the overall average prices of markets such as Xi’an, Shenyang, Hangzhou, and Wuhan were almost the same as last year’s lowest point; the hot-rolled market showed a pattern of broken positions, and the mainstream market’s decline even exceeded 100%. yuan.

At the same time, the prices of rebar, coils, and plates have all dropped back to their lowest levels in the past three and a half years. As far as the Shanghai market is concerned, compared with the highs in mid-February this year, the prices per ton of rebar, hot coil, and medium plate fell by 470 yuan, 740 yuan, and 460 yuan, respectively, both falling by more than 11%, of which the volume of hot rolled coils fell. Even up to 17%.

The China Iron and Steel Association published an article signed by Xue Heping that, from the perspective of the spot price of steel products this year, the national steel price has reached a stage high since February 20, and the post-holidays steel price has begun to drop sharply, and has repeatedly created since the beginning of the year. The new low. At present, it is running at the bottom of nearly five years and builds a staged bottom.

While steel prices continue to decline, the prices of raw materials such as iron ore and coke also continue to decline. Last week, coke, scrap, pig iron, etc. continued to decline, and the decline in import mines expanded. Among them, the Australian ore PB meal ** fell by 4.4% in a single week, which is the larger one in the historical weekly decline. On May 22, the Mysteel Iron Ore Composite Index closed at 136.4 points, down 13.6% from the year's high of 157.8 points on February 21 this year. Among them, 61.5% of Australia's PB fines crush price reported at 123.5 US dollars / ton, while in February this year, the price once soared to 157.25 US dollars / ton.

With regard to the profitability of steel enterprises, the data released by the Development and Reform Commission on the 23rd shows that in the first three months of this year, the steel industry realized a profit of 36.49 billion yuan, an increase of 1.1 times year-on-year. Shenyin Wanguo believes that the main reason is that the operating cost of steel enterprises in the first quarter fell by 5% year-on-year, while operating income only fell by 2%, and gross profit margin improved. Shenyinuoguo also pointed out that although the growth rate of net profit in the steel industry has improved significantly in the first quarter, the industry is still at a low profit level.

Output remains high in the short-term. According to the data released by the Development and Reform Commission on April 23, the country’s crude steel output in April totaled 65.65 million tons, a year-on-year increase of 6.8%, an acceleration of 4.2% year-on-year, and an increase of 8.1% in steel production. Speed ​​up 0.2% year-on-year. From January to April, the country's crude steel production was 25.8151 million tons, an increase of 8.4% year-on-year, an acceleration of 6.5 percentage points year-on-year, and steel production of 33.26 million tons, an increase of 10.5%, an acceleration of 4.3 percentage points year-on-year.

According to the latest statistics from China Iron and Steel Association, the average daily output of crude steel in the first half of May hit a record high, reaching a daily volume of 2.19 million tons. The annual output of crude steel reached nearly 800 million tons.

According to industry sources, there has been no delay in reducing production, which is related to the current industry losses. The main reason is that once production is suspended, problems such as bank lending, government pressure, and employment will occur, and the loss of production suspension will be greater than the reduction of production. It can be predicted that in the next three to four months, the possibility of a substantial reduction in industry autonomy is unlikely.

Despite the decline in ore prices, it may be difficult for the steel mills whose earnings have fallen month-on-month in the previous April to be materially positive. Analysts said that the decline in ore prices means that the cost support for the rebound in steel prices has further weakened, and that most of the steel mills continue to be bearish on the ore prices and will continue to focus on accelerating the consumption of high-priced inventories in the previous period. Therefore, crude steel production will remain in the short term. High position.

However, the researcher also stated that although the current steel mills' production cuts are less than expected, considering that the peak season has passed and the off-season is approaching, combined with the high-temperature power cuts and the steel mills are about to arrange annual repairs, there are still high impact environmental protection sticks, etc. The high output in the later period may drop back. If there is a clear reduction in production and repairs at the steel mills, there will be a more pronounced drop in production in June.

Leading steelmakers are watching the market in the near term. In recent days, leading steel mills such as Baosteel, Wuhan Iron and Steel, Anshan Iron and Steel, and Bengang have lowered their ex-factory prices in June. Baosteel's June hot and cold coils and medium plate prices were lowered by RMB 150-180/t, which was the first time in nine months. Wuhan Iron and Steel's June price of hot and cold coils was lowered by RMB 150-180/t; Anshan Iron and Steel and Shougang are expected to be the leading steel mills. 6 The price of the month will also be adjusted downwards.

Analysts said that the mainstream steel mills cut their ex-factory prices, reflecting that steel mills are not optimistic about the market outlook and increase the market's bearish sentiment. It also reflects the contraction of steel mills' orders.

In terms of inventory, China Iron and Steel Association released on the 23rd "May domestic steel market analysis and market outlook forecast" report, as of May 19, the major cities of the country's five major steel species social inventory of 19,064,100 tons, a decrease of 653,500 over the previous week Tons, but still increased 1.48 million tons year-on-year. According to the report, the market price continued to drop, and the pessimistic attitude of the business spread. “Controlling inventory and reducing risk” became the dominant strategy, and the market inventory decelerated faster than the previous period.

However, another analyst said that from the point of view and the magnitude of the decline in stocks, this year must be weaker than in previous years, the time is half a month late, the rate of decline is slow, the absolute value of the current inventory of construction steel is still at last year's high. From the beginning of March to the middle of June, it was a period of destocking, but from the perspective of this year, the destocking process may continue until July, and the slow progress of destocking will delay the time when steel prices bottom out.

Regarding the later trend of steel prices, the report of the 23rd China Iron and Steel Association believes that as raw material prices fall, the cost gradually moves downwards, and the recent steel mill production enthusiasm continues to decrease. Under the “controlling inventory and risk reduction” operation strategy, the steel social inventory continues. However, the year-on-year decline was still relatively high; the downstream industry was dominated by depletion of inventories and its production enthusiasm was low. The advent of the high-temperature rainy season would also restrict the release of demand; the dominant steelmakers saw the market lower prices and increased the market's bearish sentiment. On the whole, the domestic steel market will remain at the bottom of shock phase in June.

The above analysts also said that given the current contradiction between supply and demand is still more prominent, and the macro side of no good policy introduced, it is expected that steel prices will remain weak in the short term, the end of the third quarter will turn for the better.