Last week, domestic steel prices re-emerged in a crazy rising trend in early March. In particular, prices in the northern and western regions rose by more than RMB 300/ton during the week, and many market prices have exceeded the high prices at the beginning of last year. These prices have risen too much. Regional short-term adjustments have been inevitable. However, steel prices in eastern China are relatively low, resources are still tight, and there is limited room for price correction. Based on this, this week's market will be dominated by more shocks!
In conjunction with the specific circumstances of last week, this week's steel market forecast!
Last week, the trend of steel prices was strong and weak. At the beginning of last week, raw materials and finished products generally rose sharply, and the market was very bullish, and the transaction atmosphere was also improved. However, near the end of the week, the decline in futures and the reduction of billets have led to signs of loosening in the steel market as a whole, and steel prices in many cities have declined slightly. However, subject to factors such as low inventory and scarcity of resources, there is still support at the bottom of the price. For this week's trend, Xiao Bian made a detailed analysis based on factors such as market, inventory, supply and demand. Specifically:
Last week, domestic raw material prices rose in an all-round way. Billets and imported ore prices fell slightly after continued high prices. Scrap prices rose sharply, and domestic ore prices and coke prices rose slightly.
Steel billet market: Tangshan billet prices increased sharply during the first half of last week to the last week of last week, with a cumulative increase rate of RMB 200/ton, while the price of common carbon steel bills once reached RMB 2280/ton, a record high since late December 2014, Thursday's price There was a drop of 40 yuan/ton. Tangshan Yan Gang’s successful bid price reached 2,340 yuan/ton on Wednesday, 236 yuan/ton higher than that in the previous period, and 90 yuan/ton higher than the ex-factory price in Japan, indicating that the billet resources are tight and users are bidding very aggressively, far higher than the market price. The tender price also formed strong support for the spot billet movement.
At present, the billet resources are still tight, and the overall level of billet storage is low. However, steel mills can still export orders and there is no pressure on billet supply. On the other hand, the sales of downstream finished products are booming. Due to the partial out-of-specification of some steel mills, the supply of liquidity is relatively low, and the price of finished products has repeatedly jumped, forming a strong support for the billet price. However, the current price has been at a high level, and the market has increased its wait-and-see atmosphere. It is expected that the price of billet in Tangshan this week will be adjusted slightly.
Coke Market: Domestic coke prices rose slightly last week, prices in Shanxi and Hebei increased by 20-30, and prices in Shandong increased by 50 yuan. Affected by the implementation of a series of environmental protection policies by the government, the coking coal resources in Hebei are slightly in short supply. Coal prices in various regions are gradually raised. The coke enterprises are willing to increase due to cost support. The coke stocks of steel mills are low, and some steel mills are willing to accept price increases. .
Coking enterprises in other regions are interested in recovering a certain amount of time before the price of coke rises again. The financial derivatives coke futures are shocked by 3 consecutive daily limit, driving the spot to rise, which supports the spot price of coke in the later period. According to statistics, China exported 1.12 million tons of coke in March, an increase of 240,000 tons from the previous month and an increase of 27.27% from the previous month. From January to March, 2.74 million tons of coke were exported, an increase of 500,000 tons year-on-year, an increase of 22.1%. It is expected that domestic coke prices will continue to rise slightly this week.
Scrap market: Last week, the domestic scrap market price rose sharply. The increase in most regions exceeded 100 yuan/ton, and even exceeded RMB 200/ton in some regions. Recently, the prices of billets and finished products have been continuously rising, and the domestic scrap market price is not to be outdone. Last week, they increased their gains.
In the current scrap market, some merchants appear to be waiting for goods to rise. However, most of the merchants still insist on fast-forward and fast-out, and the mode of a small amount of inventory is the main one, and they believe that the risks are constantly increasing. The recent purchase price of steel scrap by scrap mills has also been significantly raised. On Monday, Changzhou Zhongtian raised the purchase price of scrap-containing steel by RMB 80/t. It is expected that domestic scrap prices will continue to rise slightly this week.
Iron ore market: Last week, the price of iron fines in Hebei area rose slightly. Last week, the market price of finished materials rose sharply. The profitability of iron and steel companies was relatively large, and the demand for iron ore prices was increased. At the same time, the price of imported ore rose sharply last week, once breaking through 60 US dollars/ton, and it also formed strong support for the trend of domestic mines. Last week, major domestic mines raised iron ore fines without tax ex-factory prices, and the purchase of steel mills remained basically normal. It is expected that the price of Hebei Tiefen powder will still rise slightly this week.
Last week, the price of imported ore fell sharply and it broke the $60/ton mark for the second time this year on Wednesday. As of April 14th, the Platts 62% iron ore index was quoted at $58.75/ton, up $5.15/ton from the previous weekend. Recently, the domestic steel market price has continued to rise, and the earnings of the iron and steel enterprises have improved, and more and more iron ore purchases have been made.
According to data from the China Iron and Steel Association, in March 2016, the number of iron ore import licenses issued was 11787.90 million tons, a sharp increase of 39% from the previous month. China's iron ore import volume is expected to increase further in April. As more domestic steel mills resume production capacity with high profits, demand for iron ore will remain at a high level in the later period. Iron ore prices are expected to remain strong this week.
Supply and demand analysis
In the major cities of the country, rebar stocks totaled 483.27 million tons last week, a decrease of 362,800 tons. From the perspective of major cities, rebar stocks in most major domestic cities fell last week. The cities where inventory changes are more obvious are as follows: Chongqing has the most obvious reduction in inventories, with a reduction of 65,000 tons, Guangzhou stocks decrease by 61,000 tons, Shenyang stocks drop by 38,200 tons, Kunming stocks by 33,000 tons, and Changsha and Guiyang stocks by 2.50. Ten thousand tons.
Last week, the total number of hot rolled inventories nationwide was 2,960,500 tons, a decrease of 89,500 tons compared with April 8, a decrease of 293,300 tons from the previous month and a decrease of 1,009,600 tons from the same period of last year. From the city's inventory data, the city with the most increase in inventory is Chongqing, an increase of 0.7 million tons from the previous week; the city with the most decline in inventories is Shanghai, a decrease of 24,000 tons from last week.
Last week, the national mid-plate inventory continued to decrease compared to last week, and the market digestion rate weakened. Last week, the total stock of China's mid-board was 878,000 tons, a decrease of 0.35 million tons from last week. From the point of view of the city, the number of cities with significant reductions in inventories was reduced by 0.5 million tons.
From the perspective of inventory, last week, the arrival of steel mills around the country was still relatively small. In some regions, the daily factory resource requirements were not uniform, and social stocks had been declining for five consecutive weeks since mid-March. Decreased by about 30% in the same period of last year. Low stockpiles formed positive support for the rise in steel prices.
Comprehensive point of view
Last week, the national steel price rose sharply. For this week's market conditions, we remind everyone to pay attention to the following aspects:
First, the demand factor. Last week, the country’s market share was strong first and then weak. In the first half of the week, end-users and middlemen entered the market to purchase actively, and the market watch-side atmosphere was significantly increased in the second half of the week, and the transaction volume declined. In the first quarter, China’s real estate development investment and infrastructure investment growth all rebounded significantly, and the growth rate of new housing starts has reached a new high of nearly four years, indicating a significant improvement in the real estate and infrastructure markets. Short-term domestic demand will remain high.
Second, supply factors. In March, the average daily output of crude steel in China reached 2.279 million tons, a significant increase of 12.95% from January to February, and it was close to the peak level of 2.39 million tons in June 2014. It can be seen that due to profitability, steel mill production is gradually accelerating. Recently, Tiantie Group, Tangshan Ganglu and other steel mills have fully resumed production. Tangshan Songting and Shanxi Haixin are also planning to resume production from the end of April to the beginning of May. It is expected that the average daily output of crude steel in China in April will likely hit a record high.
The acceleration of domestic steel mill production will change market expectations to some extent. However, in the short term, the supply of new resources in the local markets is still limited. The inventory in the national market has dropped by 30% compared with the same period of last year, and the pressure on short-term market supply will not rise significantly.
Third, the cost factor. Last week, the prices of raw materials such as iron ore and steel billets rose in an all-round way, but overall the profitability of iron and steel enterprises further expanded. The current profitability of domestic steel mills has been at the best level in recent years. Last year, serious loss-making steelmakers such as Jiuquan Steel and Maanshan Iron & Steel announced that they had turned losses into profits in March.
According to data from the China Iron and Steel Association, in March 2016, the number of iron ore import licenses issued was 117.77 million tons, a sharp increase of 39% from the previous month. China's iron ore import volume is expected to increase further in April. With more domestic steel mills recovering their production capacity with high profits, the demand for iron ore will remain at a relatively high level in the later period, and the short-term market may show a weak trend of strong steel.
Fourth, macro factors. In the first quarter, the Chinese economy achieved a good start, and most of the economic data improved significantly. In particular, real estate data improved, infrastructure investment accelerated, and domestic demand was gradually recovering. This will, to a large extent, boost market confidence. However, the current market still has considerable controversy over the quality and sustainability of economic improvement. It is believed that the main reason is that the transition from the supply-side reform to the demand-side stimulus in the macroeconomic policy level has brought about a phased improvement in the economy. To some extent, there is an overdraft phenomenon. It is still worth noting whether economic growth can continue to improve.
In a nutshell, last week's domestic steel prices re-emerged in a frantic rise in early March, especially in the northern and western regions where prices rose by more than RMB 300/ton in one week, and many market prices have exceeded the high prices at the beginning of last year. The short-term adjustments in the regions where prices have risen too much are inevitable. However, steel prices in eastern China are relatively low, resources are still tight, and there is limited room for price correction. Based on this, this week's market will be dominated by more shocks!