Analysis of China's Steel Price Trends in July 2012

According to the well-known steel spot trading platform - China Steel Spot Net's June steel price trend report, as of the end of June, the five major national markets (high line, rebar, hot rolled coil, cold rolled coil, plate) Variety of steel prices fluctuated within a narrow range and the market transactions were generally weak: the average price of 6.5mm high line was reported at 4,056 yuan, down 49 yuan from the same month of last month; the average price of 25mm secondary thread was 4050 yuan, down by 25 yuan, Shenyang, Shanghai, Some markets such as Guangzhou and Chengdu rebounded; the average price of 1.0mm cold-rolled sheet was reported at 4,898 yuan, down 154 yuan, of which Zhengzhou and Shanghai fell more than 200 yuan; the average price of 5.5mm hot-rolled coil was 4102 yuan, down 76 yuan; 0.47 The average price of mm colored coated board was reported at 5913 yuan, down by 75 yuan. Shanghai, Wuhan, Fuzhou, and other parts of the market remained stable; the average price of 1.0mm galvanized sheet was reported at 5040 yuan, down 66 yuan, of which Fuzhou was flat; 20mm plate The average price reported at 4065 yuan, or 82 yuan, of which the Chengdu market fell 200 yuan in a single month, the largest decline.

The favorable policy dividend was diluted by the “weak” trend of national steel prices in June

In the steel market in June, there were various benefits. The interest rate cuts, approvals for major infrastructure projects were accelerated, and the subsidy policies for household appliances, automobiles, etc., which stimulated consumption, continued; however, in the case of such a multi-benefit case, the only ones were missing. The support of the fundamentals of demand has made the rebound of steel prices short-lived, and it has now entered the period of consolidation of the embarrassing dilemma.

The author believes that the reason why so many favorable policies cannot cause the strange phase of steel price rebound strongly; the most important one is that the current steel market is in an excessively rational stage; even though this rationality is “a bit of a snake bite once Fear of self-defense, but it is somewhat excessive, and even wiped out China's steel trade industry a dare to "gamble, take risks," the tradition has become very careful.

There are many favorable policies, and in the absence of the actual release of end-user purchases and restocking, the vast majority of steel traders, and especially middlemen who rely on market operations, have almost completely lost their voice; The phenomenon of large-scale hunter-dealing gambling in the face of major positive stimulus and expected strong demand in the future is over forever; the steel market has lost its last active atmosphere in the off-season demand. Under the multiple pressures of high production capacity, low demand, financial difficulties, and weak business mentality, steel prices have only been regrettable for a long time. This made the overall steel price trend in June as a “weak” posture, not only because of weak prices, but also weak transactions and weaker mentality.

Then, in July, which is about to enter the midsummer, will the domestic steel market continue its “June Snow” or will it continue to “heat boil the frogs”, or will it be “hot like passion”? We are unusual to discuss one or two from the following aspects.

It is difficult to reduce production capacity. Domestic steel inventories are still running high in July. Although some domestic steel mills have increased their inspection and maintenance efforts since June, it is undeniable that more new production capacity is being gradually put into production, especially for rebar production. It is difficult to bring down the overall production of steel mills in the later period. At the same time, it was widely reported that in order to maintain good economic data, local governments required that the production capacity of iron and steel and other industries continue to maintain normal levels in order to offer gifts to the upcoming ***; it is estimated that the overall steel production capacity in July will show the high output of state-owned enterprises and the decrease in private enterprises. .

Under this circumstance, the domestic steel stocks in the future are unlikely to drop sharply; in accordance with the seasonal factors, the steel industry, which has been continuously destocking for 18 weeks, will slow down the inventory rate this week; in the future, the export situation of steel products will deteriorate. Under the background of the difficult domestic terminal demand, steel stocks are still highly likely to operate at high levels.

According to data from China's well-known steel spot trading platform - China Steel Spot Network Inventory Monitoring System, as of the end of June, the total social inventory of the five major steel products in major markets (wire, thread, hot-rolled, cold-rolled, plate, etc.) was 15.5330 million tons, an increase of 69,600 tons from the previous week, and the 18-week continuous destocking ended. The stock of wire rods was 1.5036 million tons, down 0.41% from the previous week; the thread stock was 6.8184 million tons, up 0.28% from the previous week; the hot-rolled coil stock was 4,157,600 tons, 0.87% higher than last week; Coil inventories amounted to 1,639,600 tons, up 0.15% from the previous week. Plate stocks were 1.6691 million tons, up 0.82% from the previous week.

The seasonally weak terminal market in summer will not be able to change the weak demand in the steel production capacity is difficult to have a considerable decline at the same time, the downstream industry is also weak mainly. The first is that the growth rate of the manufacturing industry continues to fall, and various policies to stimulate consumption have failed to stimulate the growth of the production and sales volume of related manufacturers. In the major steel industry, the general steel equipment industry, automobile manufacturing, railways and ships are the major steel-consuming industries. The growth rate continues to decline, making the market demand for cold and hot-rolled sheet metal extremely weak, and the related steel prices are barely under the support of cost to maintain a weak stable pattern.

Secondly, industries such as infrastructure, highways, real estate, and affordable housing projects, despite the government’s repeated policy support, expect that the construction of a series of major projects will stabilize economic growth; however, some projects are still undergoing preparations, and more project projects are Slow progress due to the difficulty of financing. In general, the steel demand in the domestic end-industry industry is hard to meet in the short term.

Although the export situation of steel products improved significantly in May, but with the global steel production capacity surplus, the further decline in demand for steel, coupled with the unresolved crisis in the euro area has always restricted the global economic trend; Europe and the United States and Japan and other countries have increased the export of various types of steel in China Anti-dumping investigations; The global steel trade protection war was stimulated at one time; the situation of late steel exports is not optimistic. Under this circumstance, our judgment is that if the protection housing project does not show the summer blowout-like construction acceleration in the summer of 2011, the fundamentals of demand for the steel market in the coming July will be hard to change.

Funds may be loosened, but it is difficult to directly affect the steel market. In view of the fact that the economic data in the first five months was far lower than expected, the country is stepping up its efforts to introduce a series of stimulus policies to ensure stable economic growth, including cuts in interest rates, RRR cuts, accelerations, and increases. The investment and construction of major infrastructure project projects; last week, the central bank broke record and launched two consecutive large-scale reverse repurchase operations. At the end of the month and the end of the quarter, the intention of releasing liquidity was very obvious.

From a variety of agencies, the market is generally cautious about the economic operation data in June. As such, in July, the expectation of a lowering rate will once again be expected; the signal of loosening of market capital funds is very clear. However, analysts at China's steel spot network pointed out that although financial market liquidity is relatively loose, and there is a more relaxed trend in the later period, it is difficult to directly flow into the steel market. He analyzed that China's steel industry, especially steel trade companies, has already formed a serious case of dishonest integrity in the banking system, and even some banks have directly pulled the steel trade industry into the blacklist; **, financing difficulties are taking a step by step Overwhelming majority of China's steel trade enterprises.

The author believes that the bank raises the threshold for steel trade enterprises, and on the surface it appears that steel trade companies are not sincere; but the root cause is the difficulty of making profits or losses just after China’s iron and steel industry ends its huge profits. In the current period, the steel price did not fall or rise; it made the bank’s profitability and risk to the steel trade gambling not proportional; unprofitable this may be the main reason why the banking industry refused to easily lend steel trade.

Under such circumstances, which side of your industry's financial markets outside the financial market loose enough to be able to tuck into the truck; because of the high threshold, the funds can not directly flow into the already dried up steel industry. In addition, the downstream terminal industry is also plagued by the economic downturn. The procurement of steel and iron raw materials is mainly wait-and-see, and the market is heavily funded. It is expected that the effect of rapid return of funds through sales will be insignificant. Under such circumstances, the capital chain of the steel industry is still in a state of tension in the future; it is not conducive to the improvement of the steel market.

The environment is weak in the short-term and the national steel price trend in July is hard to be “strong”

In the current Chinese steel market, the supply and price attitudes of upstream steel mills have reversed the trend of high production and inventory, high inventory levels, and the end-user demand has remained weak. Although the raw material costs are firm, it is still difficult to pull the tide. In addition, the global economic situation remains short-term. It is difficult to make a good change and drag down the demand for steel for global use. As the country with the largest steel output, the Chinese steel industry has suffered more injuries.

In addition, the euro zone crisis continues, although the latest news shows that the EU summit brought about temporary stability and good but far from the degree of optimism, and in June the manufacturing PMI index continued to fall to 50.2%; indicating that China’s industrial economy was under pressure in June Heavy; economic data is still hard to see, the entire economic environment is still showing weaknesses, and it is difficult for the steel market to have firm support.

Through comprehensive consideration of the above factors, the author believes that the domestic steel market fundamentals are unlikely to improve fundamentally in July, and weak terminal purchasing remains the mainstream phenomenon; but with the continued strength of raw material prices, the profitability of steel mills is shrinking. During the majority of July, the willingness of the steel mills to stabilize prices gradually increased; on the premise that the market does not show any significant positive or negative, the trend of Chinese steel prices in July will continue to be weak and the bottom line will not be ruled out. There may be repeated shocks.