Steel city temporary pressure short - term should not be too short - run

In the past one month, with the spread of the international epidemic and the sharp decline in the price of crude oil, domestic steel prices have also seen a volatile decline trend.Up to April 2, the main steel rebar contract RB2010 closing price of 3,229 yuan/ton, compared with the early march closing price of 3,473 yuan/ton down 244 yuan/ton.The price difference between the RB2005 contract and the RB2010 contract widened from the discount of 51 yuan/ton one month ago to the current premium of 144 yuan/ton, widening the price difference by 195 yuan/ton.The main reasons for the above changes are the following four points: one is the technical repair near the end of the rebound momentum is insufficient;Second, the price rise to inventory is a false proposition;Third, the return of migrant workers bring scrap prices down, thus driving down the black cost;Fourth, the actual social inventory is greater than the inventory website statistics.In addition to the above four reasons, the domestic steel market has also been apparently helped by the faster than expected spread of the disease abroad, the sharp decline in international crude oil prices and the frenzied plunge in global stock markets.

In the process of market decline, market pessimism will rise, thus affecting the rational analysis and judgment of some basic industrial logic.For example, there is a view that steel into a new bear market, the price is expected to hit the previous round of bear market low;There are also views that the economic impact of the outbreak is far greater than the financial crisis of 2008;And so on.Although the steel market, the stock market and the global economy are indeed facing great uncertainty, but the author believes that it would be biased to draw some qualitative conclusions too soon.There are four reasons: first, the current economic pressure is mainly from the impact of the epidemic, and the epidemic itself is unpredictable, the qualitative prediction based on the unknown is not scientific;Second, the economic pressure will inevitably lead to strong government intervention, including tax reduction, fee reduction, consumption promotion and more than expected increase in monetary liquidity and other measures. The stimulus effect of these intervention policies on the economy will be accelerated with the recovery of the epidemic.Third, some poor economic data have been reflected in the stock market and commodity prices to some extent, such as the increase in unemployment in the United States, European and American manufacturing fell sharply;Fourth, the decline of the international crude oil price, which has the title of "king of commodities", goes far beyond the logical scope of supply and demand fundamentals and is not sustainable.In this context, the author believes that although there is some pressure in the steel market, but short - term should not be too short - run.Three main considerations:

After the supply-side structural reform of the steel industry, the competitive ecology of the industry has improved significantly, and it is difficult to see vicious competition.On the one hand, the supply-side structural reform banned more than 100 million tons of low-end production capacity, and these low-end production capacity is its absolute low cost advantages continue to depress the steel market price, thus causing the industry "bad money to drive out good money" phenomenon.For example, the production cost of general intermediate frequency furnace is about 200 yuan/ton lower than the production cost of normal electric furnace. In the case that the market lacks supervision on the steel quality or the supervision is not strict, low-quality "floor steel" products are easy to squeeze the market space of other compliance process products.This is unlikely to happen again after the strike on "floor steel".On the other hand, the combination of strong and strong steel enterprises and merger and reorganization is conducive to the improvement of the concentration of the industry, the industry to strengthen self-discipline, enhance competitiveness.

Although the steel storage water level is much higher than the same period of the previous year, but its absolute level does not fully reflect the supply and demand relationship.In China, affected by the epidemic situation and the superposition of the Spring Festival two factors, the steel social inventory is far more than the level of the same period in previous years.Take galvanized steel sheet as an example, as of March 27, social inventory reached 13.3594 million tons, compared with 8.722 million tons in the same period last year, an increase of 4.636 million tons, or more than 53%.To some extent, social inventory reflects the result of supply and demand in a certain period of time, but it cannot reflect the whole relationship between supply and demand.In fact, although the social inventory is high, but with the continuous promotion of the resumption of domestic work, the market demand is also rapidly released.At present, the social inventory in the furnace steel continued to produce the situation, has been two weeks of decline, and the decline has an expanding trend, from the side to reflect the strong demand.

The spot price of steel has been close to the actual production cost of steel mills, and even some varieties have a loss, the short-term cost support effect will be reflected.After a major correction in the early price, the current steel spot price has been close to the break-even line of steel mills.Although in the long run, the argument that cost support prevents steel prices from falling is not convincing, the short-term support effect of cost exists in a short period of time (such as the stocking cycle of steel mills' raw materials, usually about 1 month) and in the long term without the expectation of a significant and sustained decline.According to the calculation of the 2005 contract, the virtual profit of the current HC2005 contract is about -100 yuan/ton, while the actual spot loss of some non-coastal steel mills may be larger.This has a certain inhibitory effect on the later production of the enterprise.

The outbreak of "war" response, the steel city is temporarily under pressure, but considering that April ~ may is the traditional steel demand season, the price elasticity of construction steel is relatively high, the probability of successful warehouse order closing warehouse is small, it is expected that in the short term, the steel price further significant decline space is not large.In operation, RB2005 contract to buy on the dips, RB2010 contract temporarily to wait and see.