SMM News: from the macro data in June, the growth rate of real estate investment has changed from decreasing to increasing, the three areas have gradually warmed up, and the toughness is still there; the capital construction projects are fully funded, and the growth rate has further rebounded, and it is expected to become a regular employee in August. Under the strong performance of the two terminal demand, we are more optimistic about the demand for rebar in the second half of the year. By the end of July, the impact of the Meiyu season has gradually weakened, and apparent demand is expected to rise again to a high around 4.2 million tons, supporting steel prices to continue to strengthen.
The trend of real estate recovery is obvious.
There are still some structural contradictions in the current real estate data. The latest data show that from January to June, China invested 6.278 trillion yuan in real estate development, an increase of 1.9 percent over the same period last year. However, from January to June, the new construction area, construction area and completed area of real estate are-7.6%, + 2.6% and-10.5% respectively compared with the same period last year, reflecting that a large amount of real estate investment is concentrated in the construction stage. however, the difficulty for enterprises to obtain land leads to the weak growth rate of new construction, the interference of epidemic situation and the prolongation of construction cycle caused by the interference of rainy season, which makes it difficult to increase the growth rate of completion. On the sales side, the sales area of commercial housing from January to June was 694.04 million square meters, down 8.4 percent from the same period last year, or 3.9 percentage points lower than that from January to May. On the whole, from the perspective of start-up and sales, due to the large stock of real estate construction area, optimistic terminal transactions and the overall ample capital, the demand for rebar in the second half of the year will still show a strong trend under the support of investment. However, from the annual point of view, due to the small area of land purchased by real estate enterprises in the past two years, if the land acquisition by enterprises has not changed significantly in the second half of the year, they will face a weaker demand for rebar in the post-cycle of real estate next year.
From January to June, national fixed asset investment (excluding farmers) totaled 28.1603 trillion yuan, down 3.1 percent from the same period last year, or 3.2 percentage points lower than in January-May. Of this total, infrastructure investment (excluding electricity, heat, gas and water production and supply) fell 2.7 per cent from a year earlier, 3.6 percentage points lower than in January-May. Judging from the data alone, the performance of infrastructure investment is not as good as that of real estate, and it is still declining compared with the same period last year, but in fact, the recovery of infrastructure investment from the low level is significantly greater than that of real estate. The current infrastructure project is characterized by a large number of projects in the next 1-2 years ahead of schedule, making the overall infrastructure performance this year better than expected. In addition, from a financial point of view, one of the major problems affecting the construction of infrastructure projects in various places last year was the shortage of funds after the government reduced taxes and fees, making it difficult for many projects to start smoothly, while this year's funds are relatively abundant. M2 and social finance have performed well, so they are still optimistic about the infrastructure performance in the second half of the year, which is also a strong guarantee that rebar prices can continue to strengthen in the future.
Demand resilience is still there.
In the early stage, with the sharp pick-up of the overall market sentiment, the demand for rebar and the price went up together, and the spot transaction volume gradually increased, but at the same time, the operating rate of cement mill and cement price showed a slight decline. Due to the short storage time of cement, it can reflect the real change of demand in time, which shows that the real demand of rebar terminal is still in the weak stage, and a large part of the current transaction of steel is speculative demand in the market. at this time, attention should be paid to the risk of spot stagflation of rebar after basis difference repair. However, it should be noted that the current weak demand is not caused by poor overall downstream construction, but is caused by short-term periodic rainy season and flood disasters. Before the rainy season this year, the apparent demand for rebar once reached the level of 4.7 million tons. As the elasticity of demand itself is relatively smooth, with the end of the rainy season, there is a high probability that there will be a second demand backlash. There is no need to be too pessimistic about this.
Overall, under the current market, the real estate demand is still resilient, the investment growth rate of infrastructure projects is picking up obviously, and the demand for rebar in the second half of the year is still relatively optimistic. Recently, the market is affected by the rainy season, the performance of the spot end is poor, but as long as the demand resilience remains, the apparent demand is expected to pick up again, thus bringing strong support to the steel trend.
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