Recently, the steel market has shown great volatility, with multiple important indicators volatile, and the overall demand outlook seems to be relatively dull. This phenomenon has caused concern among market participants, who are closely following the changes in the future direction of the market.
Spot price and basis performance
Recently, the steel spot market has shown a stable trend and signs of upward trend have begun to appear; at the same time, the basis has shown a downward trend; especially the hot coil basis, its downward trend is more significant. In East China, the actual trading price of rebar has risen to 2,990 yuan per ton, up 20 yuan from the previous one; in addition, the October futures contract was 1 yuan higher than the spot price. The price of hot coils in East China has climbed to 3,220 yuan per ton, with an increase of 20 yuan. At the same time, the price difference between the main contract and spot stock has a discount of 112 yuan per ton. The fluctuations in spot prices and the shrinking of basis together reveal the current market turmoil and instability.
Supply output status
In the field of steel supply, although production volume has decreased, the decline is not significant. Specifically, the total output of the five major steel varieties in this period decreased by 4,700 tons to 8.8 million tons; among them, the production of rebar decreased by 70,000 tons to 2.18 million tons; while at the same time, the production of hot coils increased by 90,000 tons to 3.287 million tons. During the January-May period, the total iron production increased by 15 million tons year-on-year, with an average daily increase of about 100,000 tons, which fully demonstrates the strong momentum of the previous supply.
Current status of demand side
The demand side is not good, and the demand for major materials continues to decline. This week, due to the impact of the Dragon Boat Festival holiday, the decline was significant, reaching 320,000 tons, and the total volume dropped to 8.82 million tons. Observing the data from January to May, the demand for major materials is roughly equivalent to the output, and the iron increment mainly flows to non-main materials and steel billets. Overall, domestic demand showed a downward trend, while international demand has increased, causing a slight increase in total demand. The inventory of cold-rolled steel continues to rise, which shows that the market demand for steel is changing.
Inventory trends
Steel stocks are approaching the critical value. Among the main steel varieties, inventory fell by 20,000 tons month-on-month, and total inventory fell to 13.63 million tons; rebar inventory decreased by 110,000 tons, to 5.7 million tons; at the same time, hot coil inventory rose by 78,000 tons, to a total of 3.4 million tons; in addition, hot coil inventory began to show signs of accumulation this week. Signs of inventory fluctuations are emerging, and the market supply and demand balance is being affected. It is expected that the market will face in the future.
Cost and profit situation
Coke inventory continues to rise, and its prices continue to fall, thus weakening its support role in cost; at the same time, iron ore inventory has decreased, prices are under pressure, and the overall cost support capacity has declined. Steel prices continue to fall, even lower than the electric cost of electric furnaces, and demand for building materials has declined, while demand for industrial materials has increased, and the profit gap between different varieties has gradually emerged. The combined influence of these factors has caused steel enterprises to face more severe challenges in their operations.
Market Perspectives and Suggestions
Some views point out that steel prices have shown an upward trend in recent times, but their basis shows a downward trend, and the spot market has performed relatively weakly during the traditional off-season period. According to the data of Zhaogang, hot coil inventory continues to grow, and apparent demand has decreased; at the same time, the data of the Ganglian data shows that although the overall output has decreased, it remains at a high level. As demand enters the off-season, overall market expectations are showing a weak state. This month, iron ore shipments showed an upward trend, and inventory levels have approached the historical cumulative high. When implementing trading strategies, investors need to pay attention to possible rebounds in the market and seize opportunities for short selling. In addition, the pressure range revealed by the 20-day moving average of the October contract can be referred to.
Dear readers, the steel market is currently showing complex and changeable characteristics. In view of this phenomenon, what do you think about the future direction of steel prices? Please click to like, forward this article, and look forward to you to leave your valuable opinions and comments.
Leave a Reply