[review this week]:
Futures: hot roll settlement price as of Friday 3673, down 101 yuan / ton from 3774 before May Day (April 30).
Spot: the national average price of hot rolls this week is 4033 yuan / ton, up 1 yuan / ton from 4032 before May Day.
After May Day, the news has been disturbed one after another, the market mentality "twists and turns", Tangshan production restrictions from the strict storm has not yet hot market, Sino-US trade dispute is like a basin of cold water poured into the hearts of the people, the futures market was disturbed by the news, the cumulative drop of 101 yuan / ton after the festival. However, due to the spot market supply is still in the gap at the beginning of the month, coupled with the release of post-holiday replenishment demand, prices remain basically stable. However, attracted by profits, hot coil production release is still on the way (hot coil supply + 10% in May). However, the performance of demand is relatively stable (in the implementation of the sudden tariff policy, it is difficult for downstream enterprises to seize exports in foreign trade last year, and when the overall situation is uncertain, the performance of speculative demand is on the sidelines.) therefore, the weakening of fundamentals has become a foregone conclusion. The current price beauty may be difficult to continue, and may gradually weaken in the later period.
1. Supply side: the upsurge of maintenance in steel mills is over, and the hot coil supply is + 10% in May.
With the end of the heating season, steel mills have resumed production, steel mills in May "maintenance tide" basically ended, coupled with production profits continue to rise, steel mills production enthusiasm is high (according to SMM statistics, From May to now, the average gross profit of hot coil production in long process Steel Plant is 630 yuan / ton, which is + 3.9% compared with April. Although Tangshan enters the region to limit production (steel mills account for 80% of Tangshan's production capacity), feedback from many steel mills still mainly affects sintering machines, and the production limit on the reverse side of the blast furnace has not been actually tightened for the time being, although it does not rule out the possibility of strictness in the later stage. However, it is still in accordance with the original plan of "non-stop" production.
2. Demand side: the downstream demand is weak.
According to SMM data, the PMI composite index rose 53.92 in April from a month earlier, up 4.72 from the previous month and down 0.006 from a year earlier. Among them, construction, machinery, transportation infrastructure and other industries are located in the economic range. However, as a capital construction "barometer", the growth rate of excavator sales slowed down in April, the automobile industry continued to be under pressure, and the price difference between cold and heat continued to narrow. At present, most of the manufacturing industry is disturbed by the trade dispute between China and the United States, the relevant foreign trade orders have been stopped, and the market pays close attention to the latest tariff implementation.
General treasury: this week the national total inventory of hot rolls 3.0449 million tons, month-on-week + 0.2%, year-on-year-4.5%, accumulated for two consecutive weeks, basically in the face of weak price support.
[macro and policy aspects]
1. NDRC: circular on doing a good job in resolving excess capacity in key areas in 2019
The National Development and Reform Commission (NDRC) issued on the 9th a notice on doing a good job in resolving excess capacity in key areas in 2019, resolutely preventing the resurgence of projects that have already withdrawn. We will promote the merger and reorganization of enterprises and the integration of upstream and downstream development, and cultivate a number of large enterprise groups with strong international competitiveness in the iron and steel, coal and power industries. Speed up the classification and disposal of "zombie enterprises" to ensure that all disposal work is completed by the end of 2020.
2. People's Bank of China: the people's Bank of China has implemented a lower reserve requirement ratio for small and medium-sized banks since May 15, 2019, releasing long-term funds of about 280 billion yuan.
The central bank announced on the 6th that it has decided to implement a lower preferential deposit reserve ratio for small and medium-sized banks focusing on local and serving counties, releasing about 280 billion yuan of long-term funds from May 15, 2019.
3. Ministry of Finance: the size of local government bonds issued by various localities was greatly reduced in April.
In April, local organizations issued 226.7 billion yuan of local government bonds, only about 36 per cent of the size of the March issue. In addition, the issue rate rose in April, rising more than 40BP above the lower limit, a new high for local bonds this year.
4. In 2019, the starting capacity of the national shed reform plan was reduced by more than half compared with the previous month.
The Ministry of Finance issued the Circular on issuing the Central Fiscal Special Fund Budget for Urban guaranteed Housing projects in 2019, and the number of plans for the transformation of urban shantytowns in 2019 was released. Compared with 2018, the total number of shed transformation sets in 37 provinces and cities in 2019 was 2.8529 million, nearly 51 per cent less than the planned number of 5.88 million units in 2018.
5. In the first quarter, the new debt limit of more than one trillion provinces was lowered.
In the context of steady growth, the Ministry of Finance has accelerated the issuance of special bonds for infrastructure projects. As of the first quarter, the issuance of local bonds had reached 1.41 trillion yuan, of which 1.18 trillion yuan was new bonds. That represents 85.2 per cent of the local government debt limit of 1.39 trillion yuan issued ahead of schedule this year.
[summary of major events]
1. Trade confrontation between China and the United States: two rounds of high-level trade negotiations within 10 days, the overall situation is uncertain
From April 30 to May 1, China and the United States held the tenth round of high-level trade consultations;
On May 6, US President Donald Trump claimed to impose tariffs on Chinese goods.
From 9 to 10 May, at the invitation of US Trade Representative Lettershitzer and Treasury Secretary Mnuchin, Liu he, member of the political Bureau of the CPC Central Committee, vice premier of the State Council, and Chinese leader of the China-US Comprehensive Economic Dialogue, visited the United States from 9 to 10 May. We will hold the eleventh round of consultations with the US side on economic and trade issues.
On May 10, the Information Office of the Ministry of Commerce announced that the United States had raised the tariff on $200 billion of Chinese exports to the United States from 10 per cent to 25 per cent. China deeply regrets that it will have to take the necessary countermeasures. The 11th round of high-level economic and trade consultations between China and the United States is under way, and it is hoped that the United States and China will move in the opposite direction and make joint efforts to resolve the existing problems through cooperation and consultation.
2. Jiangsu Province publicizes the "work Plan for promoting the Transformation, upgrading and optimizing layout of the Iron and Steel Industry in Jiangsu Province"
The General Office of the Jiangsu Provincial Government recently released the "work Plan for the Transformation, upgrading, Optimization and layout of the Provincial Iron and Steel Industry," which points out that it is necessary to make every effort to promote the construction of key coastal iron and steel demonstration projects by 2025. The proportion of iron and steel smelting capacity along the Yangtze River and coastal areas in the iron and steel industry in the province has been optimized and adjusted from the current 7:3 to 5, speeding up the formation of a new pattern of coordinated development of the iron and steel industry along the Yangtze River and coastal areas. We will further improve the level of industrial agglomeration, and strive to reduce the number of iron and steel enterprises in the province from 45 to about 20 by 2020, and the crude steel production capacity of the top five enterprises in the industry will account for 70 percent of the province's total. We will strictly implement the relevant provisions of the state strictly prohibiting the addition of new iron and steel production capacity, and implement the list management of key project banks for iron and steel projects implemented in the province.
3. Revenue and profit figures of luxury car companies "double decline"
Luxury car brands Audi, BMW and Mercedes-Benz reported first-quarter results. Among them, according to the financial data disclosed by Audi, Audi Group's sales revenue in the first quarter was 13.812 billion euros, down 9.84 percent from 15.32 billion euros in the same period in 2018, and a pre-tax profit of 1.196 billion euros. Compared with 1.42 billion euros in the same period last year, the year-on-year decline was 16.1 per cent; Mercedes-Benz's revenue in the first quarter was 21.2 billion euros, down 8% from the same period last year, while Mercedes-Benz's profit before interest and tax was 1.298 billion euros (about 14.46 billion yuan), down 37% from a year earlier. BMW, First-quarter revenue was the best of the three, but profits shrank sharply. BMW's revenue fell 0.9% to 22.46 billion euros in the quarter, while quarterly profit before interest and tax fell 78% to 589 million euros from 2.71 billion euros a year earlier, according to earnings data.
4. Vale: plans to resume operations of the Brucutu iron ore mine have been suspended as a result of a new court ruling
Vale: the court issued a new ruling suspending the resumption of operations at the Brucutu iron mine. Plans to resume operations at the Brucutu iron ore mine have been suspended as a result of the court's new decision. The local Laranjeiras dam and other infrastructure in Brucutu have been confirmed to be stable. Iron ore sales are expected to be between 3.07 and 332 million tons in 2019. The good price at the end of the raw material will support the steel price to a certain extent.
Inventory early warning Index of Automobile Dealers rises in May and April
VIA (Vehicle Inventory Alert Index), the latest issue of the inventory early warning Index Survey of Chinese Automobile Dealers released by the China Automobile Circulation Association on May 6, shows that in April 2019, the inventory early warning index of automobile dealers was 61%, up 5.7% from the previous month. Up 6.47% from a year earlier, the inventory early warning index is above the warning line.