Hot roll spot prices have risen ferociously this week, rebounding 142.2 yuan per ton as of today. But terminal demand has not picked up in the current rally. Mainly because demand is still in the off-season. Specifically, on the demand side, according to feedback from a downstream survey this month, industries with relatively large amounts of steel used in construction, machinery, automobiles, and household appliances (about 50%, 20%, 6%, and 2%, respectively) have a large probability of being below 50% of the PMI index. Although the large probability of PMI index in shipbuilding, transportation and other industries is more than 50 lines, but because the proportion of steel used in this industry is small, it is difficult to increase the demand for steel in the terminal industry. In addition, the machinery industry and the automotive industry downstream terminals are still pessimistic about the later market view, coupled with the construction industry is difficult to carry out construction due to high temperatures, so it is expected that the demand situation in the downstream industry will not improve in July, or will continue to bear pressure.
On the supply side, according to SMM steel mill research feedback, Tangshan today issued a list of production restrictions, environmental protection production restrictions will be implemented, and the production limit is expected to affect plate production of 1.96 million tons. In addition, Jiangsu Province recently issued a notice, will be held on the 28th to accelerate the transformation of the province's iron and steel industry to speed up the work of the conference, so environmental protection and production restrictions in the political situation has also been tightened. As a result, it can be seen that the current round of environmental protection production restrictions do not only stay in the speculation of the news, but the strength has indeed increased, the late steel mill output reduction will be gradually reflected. Overall, supply and demand may contract at the same time. However, due to the current weak demand is almost in the bottom stage, so although there is pressure in July, but the overall decline is relatively small. On the other hand, the environmental protection and production restriction is not only intensified, but also has the potential to expand at the same time, so it is expected that the supply reduction will increase in the later period. Therefore, in this case, spot prices are still expected to rise [SMM Steel]
