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After the May Day, the steel market to open crazy rising mode.
Last weekend, the price of billets was raised three times a day, with a daily cumulative increase of 150 yuan/ton, and a daily cumulative increase of 250 yuan/ton for hot rolls.
"There is no futures price to guide pricing over the weekend, spot prices are more chaotic, customers can only make exploratory purchases, the Shanghai construction steel market shows a unilateral pull-up trend on the supply side, and the purchasing power of the demand side is also limited." One investor said.
A reporter from the Futures Daily learned in an interview that since last Friday, the steel market in some areas has been reluctant to sell, restricted and closed. Steel in East China, North China, Northeast, Northwest, Southwest, and Central China has generally risen by 50-280 yuan/ton. It is worth mentioning that at present, the steel price gap between the north and the south has been basically smoothed out, and the northeast, which used to be in the national price depression, has also been on a par with Jiangsu, Zhejiang and Shanghai, and the trading atmosphere is hot.
Zhang Shaoda, a steel researcher at CITIC Construction Investment Futures, told reporters that the price of billets rose sharply after May Day, driven by the following factors: first, the cost of billet production increased. Since the Spring Festival, the profits of steel mills have increased significantly, the enthusiasm for purchasing raw materials has been high, and the prices of raw materials have continued to rise. During the May Day period, the deterioration of Sino-Australian relations and environmental protection in coal-producing areas have deepened the market's concerns about the supply of raw materials. Second, steel supply is expected to be limited. "Carbon peak" "carbon neutral" as a national development strategy, the national level and industry level attention is getting higher and higher, the supply side around the "carbon peak" "carbon neutral" related policies continue to launch, including Tangshan and Handan production restrictions, steel industry capacity replacement new regulations. At the same time, steel production still increased significantly year-on-year. In the second half of the year, the pressure of the industry to reduce production gradually appeared, and the market was relatively pessimistic about future supply. Three is the strong demand for steel. Judging from the quarterly reports of listed construction companies, the number of corporate orders has increased significantly, and the current domestic monetary policy is relatively stable, construction companies have little financial pressure, and the demand for steel is very considerable.
Guantong futures black commodity analyst Duan Zhenzhen believes that the rise in furnace charge costs superimposed on the downstream good demand is the core factor of the rise in billets. Specifically, the recent rising cost-side iron ore and coke prices to some extent support billet prices. Due to the influence of Sino-Australian relations, the market has certain concerns about the supply of iron ore, and the production of overseas steel mills is still recovering. The profit of domestic steel mills per ton of steel remains high, and the price of finished steel continues to rise. Coke prices in the high tons of steel profits and raw material end coking coal led by the continued rise, the spot end of the fifth round of rise has gradually landed.
Luo Tiejun, vice president of the China Iron and Steel Association, said that the main reason for the high iron ore prices is that the supply side is highly concentrated and the dominant power is in the hands of the seller. In addition, there is a large market expectation and speculation component. He called on the government to play a guiding role in the case of market mechanism failure to effectively curb the rising trend of iron ore prices. According to the analysis of the China Iron and Steel Association report, from the demand side, due to the rapid and large increase in steel prices in the early stage, the downstream steel industries such as shipbuilding and home appliances cannot afford the continued high steel prices, and the later steel prices cannot continue to rise sharply.
In fact, the normalized production restriction policy in Tangshan directly affected the local billet supply, resulting in the continuous rise of billet prices.
"Tangshan is the largest distribution center for billets in the country, and the participants in the Tangshan billet spot market are no longer limited to physical industrial enterprises. Tangshan billet spot transactions are active and price fluctuations are frequent. It has become a weather vane in the national market and can trigger a chain reaction. Indirect reasons should be considered from the industrial background. Billet is only an intermediate product in the steel industry chain, and its price rises because of the sharp rise in the prices of various products in the steel industry chain, from raw iron ore to many steel varieties. From this point of view, part of the reason for the sharp rise in billet prices is the resonance phenomenon of varieties in the same industry chain." Southwest Futures Black Department researcher Xia Xuezhao said.
The reporter found that the demand for steel billets increased due to the good demand in the downstream. Although the traditional small peak season has passed, the downstream demand is still in the peak season. From May 6 to May 8, the turnover of mainstream traders of building materials in China was 321600 tons, 280500 tons and 287500 tons respectively. In addition, the latest phase of rebar apparent consumption of 4 million tons, 56000 tons higher than the same period in 2019, building materials transactions and apparent consumption are at a high level in the same period in previous years, indicating that the current demand is indeed relatively strong.
"This year, China's construction industry demand has a certain degree of protection, real estate stock construction more, infrastructure also at the same time, domestic and foreign manufacturing boom rebounded, the latter downstream steel demand is expected to remain high." Duan Zhenzhen said.
On May 9, Tangshan billet had a smooth straight hair. The ex-factory price of some manufacturers rose to 5500 yuan/ton (up 150/ton). The billet price surged again. Traders were cautious in trading in the afternoon and the market had a strong wait-and-see atmosphere. Narrowband continues to rise by 150-200 yuan/ton, and manufacturers can still deliver goods. In the afternoon, the spot price of 5775 yuan/ton in the broadband market rose by 45 yuan in the morning, tax included high to 6300 yuan/ton, 100 yuan/ton higher than before noon; mainstream steel prices rose 50-160 yuan/ton, individual manufacturers suspended sales, the market wait-and-see atmosphere was strong, the overall transaction was weak; building materials market prices rose 100-200 yuan/ton, some merchants reluctant to sell closed plates; hot coil market shipments weakened, prices rose 250 yuan/ton, medium plate prices rose 50 yuan/ton, high prices, the overall transaction is not good.
Xia Xuezhao believes that the current market fundamentals are still strong. The finished material end is in the pattern of supply and demand, but the increase in spot supply is less than the increase in demand, so the inventory is continuously consumed. Strong fundamentals have promoted the rise of market prices, and the rise of market prices has further enhanced the voice and confidence of source holders (steel mills and steel traders). The current market has formed a positive cycle.
For the future of steel, Zhang Shaoda believes that steel prices will be mainly strong, and steel mill profits will remain high for a long time. At present, the industry policy is becoming more and more strict, the production side of the suppression of the certainty is very high. Although the country's import and export policies for steel-related products have been adjusted, the extremely loose monetary policies abroad have led to a continuous rise in steel prices in foreign markets. The adjustment of short-term import and export policies has little impact on enterprises and it is difficult to increase domestic supply. On the demand side, domestic monetary policy is more prudent, and both construction and manufacturing demand remains good. Overall, the domestic steel supply and demand gap is more obvious, steel prices and profits will be relatively high.
"In the larger context, global commodity prices are rising. From a long-term perspective, global monetary liquidity easing is an important factor supporting the commodity bull market. From a medium-term perspective, before the steel market destocking situation has not changed, steel prices are difficult to show a clear downward trend. From a short-term perspective, the introduction of steel production capacity replacement policy and iron ore prices to refresh historical highs to further stimulate the steel market, the rising market has entered an accelerated stage. From the perspective of the industrial chain, the acceptance of downstream users is the key factor limiting their rising space. When the price rise leads to the reduction of downstream demand and then reverses the pattern of supply and demand, the upward trend will come to an end." Xia Xuezhao said.
Duan Zhenzhen believes that before the Ministry of Industry and Information Technology's specific policy of reducing crude steel production, steel prices are easy to rise but difficult to fall. Because the supply side of the steel market after May Day is still suppressed by environmental protection production restrictions and carbon emission reduction policies, carbon emission reduction is at the height of the national strategy, the determination of the country to reduce crude steel production capacity is beyond doubt, steel enterprises in high profits under the release of production is obviously inhibited. Specifically, in terms of short-process production, the current capacity utilization rate and operating rate are 59.29 and 54.02 respectively, both of which have reached historical highs and the output has reached the bottleneck of capacity. In terms of long-process production, non-production-restricted areas are highly motivated to produce under the drive of high profits, but factors such as environmental protection production restriction and carbon neutrality policy have long suppressed the expectation of blast furnace production. On the demand side, although the traditional "gold three silver four" peak season has passed, but the weather is warmer, the construction industry just need to remain strong, in the real estate stock construction more, infrastructure continued to force the background, demand is expected to remain high, May screw steel inventory will remain high-speed to the warehouse state, steel prices are expected to continue to rise. However, it is important to note the negative feedback received downstream of high steel prices.
Since the beginning of this year, due to the sharp recovery of the global steel market, the uncertainty of raw material supply, monetary policy and other factors, there has been a short-term mismatch between supply and demand of iron ore, scrap steel and other steel raw materials, and prices have continued to rise. Many people in the industry said that the current domestic iron ore futures prices, whether in terms of increase or absolute price, are lower than the overseas Platts index, derivatives and domestic port spot, which has better played the role of price "ballast. At the same time, the sharp fluctuations in scrap prices also indicate that the active development of scrap futures varieties is imminent.
(Source: Futures Daily)
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