At This Stage, The Steel Market Still Maintains The Basic Pattern Of Tight Balance Between Supply And Demand.
The friend who must be the futures is in the "double eleven" night had gone through a night of fright. Last Friday night, suddenly a massacre on commodity futures market, early coking coal, coke, iron ore, Shanghai copper futures have harden, but in an instant, the profit set under the suppression of coking coal, Shanghai dropped present copper, iron ore, etc. By the end of yesterday afternoon, the threads, iron ore and hot rolls had even fallen. Futures markets, from inflation to collapse, have fuelled pessimism about the already weak spot market, with prices for steel in most areas returning. With the traditional demand for steel coming off season, and steel production still at high levels, some pessimists expect a sharp fall to come. But I don't think that's the case.
First, the surge in steel prices comes from a sharp rise in the price of dual-focus raw materials. The tight supply of domestic coal is continuing. Although the NDRC has repeatedly held meetings to increase the supply of coal, in terms of specific data, the national coal output in October was 28.85 million tons, which was still down 11.1% year on year. At present, in addition to the improvement of the supply of thermal coal, the supply of other varieties such as coking coal is still in short supply, and the overall yield increase is not obvious. However, from the steel mills, the coke inventory of the steel mills is still low, the short-term replenishment is highly motivated, and the high quality resources of coking coal remain. In addition, the construction of blast furnace in the steel plant is still high in the short term. The dual focus is driven by the new demand, and the short-term price can still be strong, which will continue to form a certain support for the steel price from the cost.
Secondly, the steel market still maintains the basic pattern of tight balance between supply and demand. On the supply side, although steel production remains high, overall inventory pressure is not large. In terms of production, China's crude steel output in October was 68.51 million tons, up 4.0% year on year, and steel output was 97.68 million tons, up 4.1% year on year. From the perspective of social inventory, the stock of the five major varieties of steel in China's major cities, which was counted by Mysteel last Friday, was 847.21 million tons, down 11.06% month-on-month, and 8.96% year-on-year. In terms of the inventory of steel mills, the stock of steel stocks in the national key steel mills, which was calculated by Mysteel, was 1247.55 million tons in late October, down 5.15% month-on-month, and 15.74% year-on-year. On the other hand, taking building materials as an example, the data showed that the construction area of real estate development enterprises increased by 3.3% year on year in January and October, and the growth rate was 0.1 percentage point higher than that in January and September. Housing starts grew 8.1 per cent year on year, up 1.3 percentage points from January to September. Due to the need to work before the winter, the construction schedule of most real estate and infrastructure projects in the north is accelerated before the freezing, so the rigid demand for building materials is still there in the short term. But in the long run, as the weather gradually turns cold, the demand for steel will gradually show up, and the demand side of the steel market will face the risk of worsening, and the supply and demand contradiction will increase accordingly.
Finally, from the steel mills profit level, Mysteel steel mills profit models show that the rebar profit is 170 yuan/ton, hot-rolled profit is 280 yuan/ton, profit is 150 yuan/ton, the plate cold rolled profit is 600 yuan/ton. It is hard for short-term mills to fall in profits. However, as the steel price enters the downward path, once it returns to the production cost line of the steel plant, or will force the steel mill to compress the output, then the steel price will continue to sharply downward to form a certain resistance.
In general, this round of steel price correction is a direct result of the futures market from inflation to collapse, and is also a kind of weakness after the spot continues to rise. However, the balance between supply and demand has not changed significantly in the short term. In addition, the spot price of dual coke can still be strong in the short term, and it will continue to support the steel price from the cost. As a result, it is unlikely that spot market prices will tumble in the short term. The reduction to the production cost line of the steel mill will be the benign space of the steel price correction.