What Is The Confidence Of Steel Price Rising After "Gold Nine Silver Ten"?

One third of China's steel prices, especially construction steel prices, have not only continued the "gold nine silver ten" market performance, but also increased even more.

In terms of futures, since October 28, the main futures contract of rebar has continuously increased from 3620 yuan / ton to 3826 yuan / ton, an increase of more than 5%. On November 12, it hit a high of 3868 yuan / ton, a new high in nearly 15 months.

In terms of spot goods, according to the data of my iron and steel network, 19 domestic building materials steel mills have recently raised their ex factory prices by 20-160 yuan / ton. It is worth mentioning that Zhongtian iron and Steel Group issued the factory price of building materials in the middle of November 2020, the price of screw thread steel was increased by 270 yuan / ton, and the price of high-speed wire and spiral was increased by 350 yuan / ton.

"Entering November, the speed of steel to inventory far exceeds market expectations." "The overall market demand is very good, and we have adjusted the price according to the market situation. It is expected that the market will continue until the end of this year," a steel enterprise source told the 21st century economic report

The continuation of "gold nine silver ten"

The reporter learned from various sources that this round of rapidly rising steel market in early November is more like the "delayed realization" of "gold nine silver ten" market.

"This year's rainy season lasted for a long time, and it continued to rain all over the country after September, leading to the unsatisfactory start-up situation." Wang Yangwen, an analyst at standard & Poor's global Proctor, told reporters, "September has become a fairly flat 'golden nine', and black series commodities even experienced a round of decline."

In September this year, the main futures contract of rebar fell from about 3800 yuan / ton at the beginning of September to 3500 yuan / ton in the middle of September, and then the price recovered rapidly, rising all the way to nearly 4000 yuan / ton.

For iron and steel enterprises, this round of price increase not only means the rapid decline of inventory, but also means the rapid increase of profits.

"The market before September was not good, and some iron and steel enterprises in East China even suffered losses." "After September, especially since October, the profit situation has gradually improved, and now the profit per ton is nearly 300-400 yuan," a steel enterprise official told reporters

He believes that this round of market is not only the continuation of the "gold nine silver ten", but also the embodiment of the fundamental changes of the whole year.

One third of China's steel prices, especially construction steel prices, have not only continued the "gold nine silver ten" market performance, but also increased even more. -Xinhua News Agency

In terms of terminal consumption, consumption was very weak in the first quarter of this year due to the impact of the epidemic. However, in the second quarter, a series of operations of new start-up and rush work appeared, and consumption entered a concentrated outbreak period; since the third quarter, due to the influence of high temperature and rainy weather, terminal consumption has entered a stagnation period.

"In addition to weather factors, the money used to start construction downstream also entered a tense state in the third quarter. Many customers reported that" money is tight "and the shipment is not very smooth." He said. As a result, rebar entered a "accumulation" period in the third quarter, which not only affected profits, but also continued to rise in inventory.

"In the fourth quarter, because the weather improved and the construction funds were much looser than those in the third quarter, many projects were completed about 30% in the second and third quarters, and in the fourth quarter, they had to rush to complete." "At the same time, the demand for construction steel will rise rapidly only when some projects enter the preparatory period in the first quarter of next year," he said

Qu Xiuli, vice president and Secretary General of China Iron and Steel Industry Association, said at the third quarter information conference that in the first three quarters of this year, the launch of major national investment projects and the rapid recovery of downstream industries such as automobiles and home appliances have boosted steel demand.

Aijian securities research also said that the domestic big cycle has accelerated the rebound of the manufacturing industry bottom, and the supply side orders are increasing. As one of the raw materials for the manufacturing industry, the iron and steel industry benefits from the rising demand brought by the boom cycle of the manufacturing industry.

In terms of inventory digestion, according to the data of my iron and steel network, the total inventory of the five major steel varieties in China decreased by 1.5077 million tons to 16.5046 million tons this week, with a decrease rate of 8.37% from 6% last week. The decline of social inventory was relatively larger, with a total decrease of 996100 tons to 11.3176 million tons, and the inventory of steel mills decreased by 511600 tons.

The pace of de stocking of rebar continued to increase, with the total inventory falling by 1011900 tons to 7926600 tons, the social warehouse by 685300 tons, the factory warehouse by 326600 tons, and the total stock of wire rod by 221900 tons. The speed of inventory de stocking also accelerated. The total inventory of hot rolled coil decreased by 161100 tons to 3.5681 million tons, and the total inventory of cold rolled coil and medium and heavy plate also decreased.

"At present, consumption has rebounded to about 4.4 million tons per week, while the decline in inventory is around 800000 tons per week." Gan Yong, an analyst of construction steel of Shanghai Steel Union, told reporters, "the decline of inventory data for three consecutive weeks shows that the consumption situation is not less than expected. Such consumption intensity may make the inventory relatively flat with that of last year in the middle of December, and there will be de stocking after that."

There is still support for subsequent prices

In the winter, many northern steel mills have received environmental protection production restriction notice. On November 3, the office of Tangshan Municipal People's Government printed and issued the "Tangshan 2020-2021 autumn and winter air quality enhancement assurance program" (hereinafter referred to as the "program"). According to the plan, from 0:00 on November 1, 2020 to 24:00 on March 31, 2021, except for Shougang Qiangang Steel Co., Ltd. with performance rating of a and Shougang Jingtang company adopting independent emission reduction, other Tangshan steel enterprises shall implement production suspension and restriction to varying degrees.

However, a number of market participants have told reporters that the whole winter production restriction will not be as big as in previous years.

"First of all, steel enterprises in the case of profit expansion, the willingness to reduce production on their own is weak." Gan Yong told reporters, "secondly, after years of increasing investment in environmental protection facilities, the production capacity that does not meet the requirements and must be stopped is a small number. At present, the production restriction measures are normalized. With the upgrading and transformation of environmental protection facilities, such restrictions will be gradually relaxed, and finally make the enterprises that meet the requirements benefit, so as to continue to invest in environmental protection."

According to the data of my iron and steel network, the total steel production this week fell by 10900 tons to 10686200 tons. Among them, the production of deformed steel increased by 43400 tons to 3.6369 million tons, the output of wire rod decreased by 23600 tons, the hot-rolled coil decreased by 56400 tons to 3211800 tons, and the output of cold-rolled coil and medium plate still increased in varying degrees.

From the raw material side, the prices of iron ore and coke have continued to rise in recent years, and the cost of steel mills has gradually increased, which will also push up the prices of subsequent steel products.

On November 12, the price of coke futures was 2391.5 yuan / ton, which has been rising for a consecutive month. Compared with the low level in early September this year, it has increased by nearly 30%, close to the high level in recent two years; the iron ore futures price was reported at 835 yuan / ton, still maintaining a high position in recent two years. At the same time, the latest quotation of 62% grade iron ore of Proctor was 124.9 US dollars / ton, up 60% year on year.

"After entering November, China's steel production is slow down, and the demand for iron ore is also gradually slowing down." Wang Yangwen said, "from the perspective of supply, at present, there will be no supply gap for iron ore in the fourth quarter. Compared with the previous three quarters, the shipping of iron ore from Brazil has increased significantly, and the port spot is relatively sufficient, and the price has dropped significantly."

Judging from the current level of shipment, vale can basically complete the delivery guidance volume at the beginning of the year, that is, 310 million to 330 million tons. Other mines have not revised the Guidance standard of this year, and can also complete the previous guidance quantity.

"Even if the supply is relatively adequate, iron ore prices remain high in November." "The reason is that the recovery of global demand is very good. The demand for iron ore in Japan, South Korea, India and Europe in the Asia Pacific region is recovering rapidly," she said. Therefore, the tight balance situation may continue, iron ore prices are difficult to enter the traditional sense of the off-season and have a rapid decline

On the demand side, the downstream demand remains strong and is likely to continue.

"From the downstream demand side, even if the price is increased, steel can still sell very well." Even if the cost of the steel plant is still high in order to complete the whole project, the reporter told the reporter, "the steel plant can not continue to receive a high proportion of the construction cost."

At the same time, at the end of December and the beginning of January, the whole steel market may face the problem of winter storage. At that time, if the price reaches 3900-4000 yuan / ton, the market may have fear of heights, and the willingness to store in winter will decrease accordingly.

"In the future, on the demand side, consumption in South and southwest China is the focus to be observed." Gan Yong told reporters, "in the fourth quarter of last year, a batch of local debts were issued in South China and southwest China. Therefore, in winter, consumption in South China and southwest China accounted for a relatively high proportion in the whole country. If the market remained at the level of last year or even higher, the follow-up demand would be strong."

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