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[brief comment on SMM Hot Volume: who is the culprit for the widening price gap between the two places? ]
Jun 5,2019 19:42CST
The content below was translated by Tencent automatically for reference.

According to SMM data feedback: the average price difference between Shanghai and Lecong in 2018 is 41 yuan / ton, but since then the price difference between the two places has been abnormal compared with the average price difference in 2018. Even the spot price in Shanghai has the phenomenon of catching up with and surpassing the spot price in the region. The main reason is that the spot inventory in each market has been at a relatively high level after 2000, and the Legong region has been affected by the decline in manufacturing export orders due to the poor weather and macroeconomic situation, resulting in a relatively poor demand situation. Therefore, the contradiction that the overall market supply exceeds demand is more prominent, so the spot price has been at a low level. Under such circumstances, small and medium-sized steel mills and speculative traders are more inclined to send resources to the higher-priced central China region, resulting in a sustained increase in the arrival of goods in Shanghai from the beginning of this month, coupled with the fact that the inventory is now at an inflection point, in the process of accumulation, Shanghai inventory pressure is greater, so the hot coil spot price is under greater pressure. Therefore, in the process of falling spot prices in recent days, prices in Shanghai have fallen faster. Because of the price difference, the external resources are difficult to reach the market, and the inventory is gradually reduced to the low level, so the market arrival pressure is less in the later period, which has a strong support to the spot price. Therefore, the price difference between the two places has widened in recent days. In this case, it is expected that the arrival of goods in the later period may improve, but Shanghai will continue to be under pressure in the short term. Therefore, there is still room for the price difference between the two places.

Spot: today's mainstream market spot prices are mostly rising and then falling, mainly due to the strong support of the black futures market, leading to a rebound in the mood of market traders, resulting in a stronger willingness of traders to back up. However, due to the actual demand situation of downstream terminals is still relatively weak, after the price increase, the terminal procurement mood is more cautious, so in the case of poor actual transactions, traders more take the way of reducing prices to drive the actual transactions.

Shanghai market: today's mainstream resource quotation fell 10-20 yuan / ton to 3860-3870 yuan / ton, the transaction is poor, compared with yesterday's overall trading volume has dropped.

Lecong market: today's mainstream resource prices fell 20 to 30 yuan / ton to 3910 to 3920 yuan / ton, almost no transaction, some traders although there is a hidden decline, but the terminal is still no procurement demand.

Tianjin market: today, the quotation for mainstream resources fell 20 to 40 yuan / ton to 3760 to 3800 yuan / ton, which was poor, mainly due to the low price of resources in Tangshan. In addition, the price of other cost resources such as freight to Tianjin is still lower than the local price in Tianjin, which leads to the diversion of some terminals to Tangshan. [SMM Steel]

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