Can't stop falling steel prices, who can turn the tide?
Recently, the prices of mainstream steel products have continued to fall, and the high level of supply pressure has not been effectively improved in the short term. Raw material prices are high, steel mill profits are compressed, output is still high, and the pressure of declining demand is gradually releasing. Analysts believe that with the intensification of the contradiction between supply and demand, the price of rebar will continue to remain weak in the short term, and the downward pressure will increase compared with the previous period when there is no obvious benefit on the demand side. The turning point of iron ore may have appeared, the stage of the best ore price has passed, and the pressure on supply of goods has begun to increase.
On weekends, the most pessimistic thing is the billet. A small partner said bluntly that the price of steel cannot stop falling, and it cannot stop falling! Who can turn the tide?
Many people are asking, is the rhythm of steel prices going to "collapse"?
It is reported that from 15:00 on June 13th, independent steel rolling enterprises in Fengrun District, Tangshan City will suspend production, and the District Electricity Management Office (Development and Reform Bureau) will be responsible for removing power from the suspended enterprises.
“The billet fell by 50 yuan/ton on Saturday and another 30 yuan/ton on Sunday. Since June, the billet has fallen by 140 yuan/ton.” said a steel company in Tangshan.
An industry person who did not want to sign told reporters that the current price drop is in line with the law of history, and this time of the past years is also the point in time when the basis narrows. On the one hand, the weaker demand in the off-season is mainly due to the rainy weather in the south; on the other hand, everyone is not optimistic about the long-term market demand. From the new macro data, it can be seen that the macro demand for real estate, fixed asset investment, and industrial increase has increased significantly. decline.
Last week, the price of construction steel was dominated by a decline. Thread inventories in South China, Northwest and Northeast China decreased slightly, while spiral inventories in other regions showed an upward trend. Specifically, due to the rise in raw materials this week, steel mills' profits have been slightly compressed, but the profits are still acceptable. Therefore, there is still an increase in production this week, but the short-term increase is limited.
In terms of inventory, both steel mill inventories and social inventories increased last week, indicating that traders had poor shipments and weak willingness to take orders; in terms of demand, terminal demand continued to weaken, while speculative demand did not perform well. Cost support, but the market's bearish sentiment has not changed significantly, and current operations are still dominated by active inventory reduction. "It is expected that the inventory will increase slightly this week, and the market price may show a weak oscillation trend." said Ma Liang, a black researcher at Guotai Junan Futures.
It is worth noting that since June, steel inventories have been increasing. The data shows that the social stock of steel in the week of June 3 increased by 309,500 tons, and the stock of steel mills increased by 139,900 tons for a total increase of 449,400 tons. The increase in stocks was earlier than last year, and the stock reduction began in late April. The speed continued to slow down. On March 29, 2019, steel mills + social inventories were 3,669,200 tons lower than the same period last year, and as of June 14 were 1.629 million tons higher than the same period last year.
Ma Liang believes that there are two main reasons for the continuous slowdown in inventory decline and the accumulation of inventory this week: First, the continuous decline in demand. According to transaction data from Mysteel, terminal transactions have shown a gradual decline since May. In addition, the latest real estate data released in May also showed a comprehensive decline in growth. After June, building materials will face an off-season in demand, and real estate also showed signs of decline in May, and demand in the later period is not optimistic. Secondly, in terms of automobiles, the previous decline continued, with production and sales growth still declining. While demand is declining, the output of steel mills is still at a high level. From January to May, China’s crude steel output increased by 10.20% year-on-year. The latest micro data also shows that although steel mills have recently declined in profit, their output is still high. Hovering.
It is reported that due to the recent sharp increase in iron ore prices and the continued weakness of steel prices, the profits of steel mills have shrunk rapidly, and some hot coil mills with high costs have already suffered losses (full costs). However, according to the survey, the current These factories have no intention to reduce production for the time being, saying that only when the cash cost is touched can they consider reducing production. The current hot coil spot price is about 100-150 yuan/ton away from the cash cost of these factories.
Tianfeng Futures Research Director Zhou Yaochen told reporters that the increase in iron ore prices this year has also greatly compressed corporate profits. The profit of steel has fallen from 800 yuan/ton to a low of 200-300 yuan/ton. The current steel profit situation is not very optimistic.
The above-mentioned industry insiders pointed out that the contradiction between steel supply and demand has accumulated rapidly recently. Last week, the social warehouses, factories and warehouses of steel doubled, the inflection point of stocks was looming, the spot price of coils continued to weaken, and the current high output of steel suffered a decline in demand, and the contradiction began It has gradually emerged that if steel prices continue to weaken and further touch the cash costs of some steel mills, it may cause steel mills to perform maintenance and reduce production, thereby suppressing iron ore demand and alleviating the sharp contradiction between iron ore supply and demand through the decline in demand.
It is worth noting that the DCE issued an announcement on the evening of the 14th, stating that in order to further curb potential excessive speculation, effectively prevent risks, and ensure the safe and stable operation of the market, since the settlement on June 18, 2019, it will impose an agreement on iron ore futures. The price limit of the 1909 contract and the minimum trading margin standard were adjusted to 8% and 10% respectively.
Some people in the industry believe that the exchange of margin, to a certain extent, under the background of the marketization of the international product system, is a manifestation of potential market risks.
Dong Kaiyan believes that the domestic steel market price oscillated weaker last week. Judging from the current market situation, the short-term spot operation is still dominated by shipments and inventory reduction. The continuous decline in the inventory of mainstream products in the early stage has brought a positive boost to the market, but the increase in inventory this week has increased the market's bearish sentiment. Secondly, although production companies are affected by the strong performance of billet prices and have cost support, the profits of spot resources are constantly squeezing, and a small number of varieties even continue to be in an upside-down state. Prices will continue in the short term when there is no obvious improvement in demand. It runs weaker, but the decline is limited. It is expected that the domestic steel market prices may maintain oscillations and weaken operations this week.
Galaxy Futures Research Institute believes that the macroeconomic data on real estate, land purchase, infrastructure, manufacturing and other aspects released this month show that demand is weakening seasonally, and some key industries are showing a weakening trend. Under the premise that the supply side is subject to administrative restrictions and production is not upgraded, the path for marketization to force steel mills to lose money and reduce production will be clearer.
According to Mysteel's survey this week, the cost of mainstream billets including tax is 3194 yuan/ton, an increase of 72 yuan/ton from last week, corresponding to the cash cost of long-flow threads of about 3,600 yuan. At present, the spot price of thread and hot coil is around 3800, and the ex-factory price of billet is 3470 yuan/ton (a cumulative decrease of 70 yuan/ton this weekend). The mainstream resources have not yet reached the cash cost reduction line. Some resources such as cold rolling and pickling have fallen to a loss. , The pressure from the base material to the general roll and thread is greater in the later period.
Galaxy Futures believes that the best phase of iron ore fundamentals may have passed. Since May, the total weekly shipment volume of Australia and Pakistan has increased by 3.5-4 million tons per week compared with March-April. As shipment resources continue to arrive at the port, it is expected that the period of the fastest decline in port inventory has passed. At present, the pressure on the demand side has just started. Since the steel mill has not yet reached the loss reduction line, the transmission to the iron ore raw material side has not yet been concentrated, but the pressure of the steel mill’s poor ordering will definitely be transmitted to the upstream raw material purchasing side, from the current profit space and According to the conduction process, the spot sales pressure will begin to appear at the end of this month.