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'Busy Season Is Not Flourishing' Seems To Be A Foregone Conclusion, Steel Price Is Struggling

Apr 02, 2018

Since March, the national steel market less than expected, spot prices have fallen repeatedly. Futures market reaction more strongly, on the Friday rebar and a number of related varieties of the main contract touched down plate. As of March 23 night plate closed, Mandarin Commodity thread index reported 3,296 points, the month fell 699 points, a set of rebar futures market since the index monthly decline record. "Busy season is not flourishing" seems to be a foregone conclusion, steel price trend affects the hearts of all parties.


At present, the price of rebar is much lower than the result of multiple factors resonance.


A systematic decline in commodities Because the supply side structural reform leads to the relatively tight supply of rebar, steel prices since 2016 continue to be in a state of recovery, in the housing market is more popular in the atmosphere of investors keep raising steel price expectations.


However, the fact that the domestic macro-economic growth rate has slowed down has been accepted by the market, and under the background of weak macroeconomic performance, the steel price continues to rise without power and the high risk is accumulating gradually. From the national two sessions held in March, we can feel that the central government's tolerance for slowing GDP growth, improving the economic structure and finding new impetus for social development (310328, fund bar) is the most urgent task in the current economic development process. The traditional real estate industry and the infrastructure industry have been affected, the real estate market has been strengthened, the investment in infrastructure projects has decreased compared with previous years, and the support for downstream demand will be weakened. At the same time, a series of macro-economic seminars held after the year, to a certain extent, unified the market's understanding of the macro environment, resulting in a concentrated release of market sentiment.


More importantly, the Sino-US trade friction escalation is a global financial market panic, the stock market, commodities, the most obvious reaction.


Mismatch between supply and demand mismatch expectations Before the Spring Festival, market expectations after the end of the demand start-up and supply recovery time mismatch may cause the price of rebar, but after the Spring Festival downstream site construction delay, social inventory digestion hindered, coupled with limited-season steel supply reduction less than expected, rapid accumulation of social inventory, many areas even appeared "expansion of the library" phenomenon, Expectations of mismatch between supply and demand are dashed. At present, most of the region has been released, the future will be the probability of a double increase in supply and demand, short-term high inventory is still an important factor in the suppression of steel prices. Therefore, the current fundamentals of steel is still weak, macro-pressure in the capital under the impetus to perform incisively and vividly, to macroeconomic stability and inventory digestion, steel prices may rebound.


Fundamentals need to focus on the recovery of downstream demand and the flow of social inventories.


The price of raw materials is relatively firm In the course of this round of decline, raw material prices, especially coking coal, the spot price fell significantly less than steel. Coking coal spot price firm, in the current steel mill profit under the coal mine price will not strong, to the downstream coke, steel prices form support.


Although the recent decline in iron ore prices are larger, but steel mills to increase the price of high grade iron ore prices, iron ore futures exist support. To sum up, the author believes that in the current macro and industry fundamentals under the influence of short-term drive is still downward, but the price under the influence of multiple factors or maintain a high volatility, difficult to operate. Operation, the author still maintained in the steel Trade high inventory status of steel prices to maintain a cautious proposal, closely monitor the flow of inventory and downstream terminal procurement rhythm changes.


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