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[SMM Thread Analysis] Thread circumference carding: inventory inflection point looming, price decline is difficult to reverse
Jun 6,2019 19:49CST
The content below was translated by Tencent automatically for reference.



[review and Prospect]:

Futures: this week's snail trend is weak, as of today snail 1910 contract settlement price 3713, compared with Friday 3769 yuan / ton, down 56 yuan / ton.

Spot: the national average price of screw thread fell 53.2 yuan / ton to 4027 yuan / ton from 4080.2 yuan / ton last Friday. The average weekly price fell 76.5 yuan per ton, compared with an average price of 4058.8 yuan per ton this week.

This week's period has continued its downward trend last week, and it has been in a state of price reduction for two weeks in a row, indicating that the toughness of rigid demand for building materials is still there, but after entering the traditional off-season, a small drop in demand is inevitable. In addition, the supporting effect of high costs on steel prices has also been weakened (iron ore and coke prices have entered the "consolidation period" after a strong rise in the early stage) most of the parties in the market have empty views on the future market, and businessmen, especially traders, have chosen low prices in order to close a deal. As a result, the future resonates and both fall.

However, it is worth noting that according to SMM research, the planned output of the long process steel plant is still increasing in June, but the opening rate of the short process steel plant has begun to decline slightly, mainly under the continuous compression of profits. Some markets, especially electric arc furnace steel mills in South China, have reduced production or even suspended production, so although the decline in spot prices is difficult to reverse in the short term, the spot price of threads has fallen to a low level, and at present, Demand, especially in the northern market, is not obvious, so the drop in spot prices is likely to slow further.



1. Supply side: supply continues to remain high, the opening rate of small steel mills has dropped slightly.

2. Demand side: rigid demand for building materials is still there, but seasonal decline is inevitable.

According to SMM statistics, thread inventory has been declining since 2000, but the decline rate is continuing to converge, indicating that the rigid demand for building materials is still released, but affected by seasonal interference is inevitable, and showing regional differences. The demand for feedback building materials in most steel mills in the north has dropped, but it is not obvious, while the feedback terminal in some steel mills in the south has been affected by the season, and the enthusiasm for taking goods has declined, and the warehouse has accumulated at present.


Total inventory: total thread inventory this week was 7.5976 million tons, down 95800 tons from last week and 1.2 per cent less than the previous month. The thread pool increased by 556200 tons over the same period last year.


In-plant inventory: this week thread factory warehouse 2.1795 million tons, an increase of 56300 tons over last week, up 2.6% from the previous month, up 4.3% from the same period last year.


Social inventory: 5.4182 million tons of screw thread this week, down 152100 tons from last week. It rose 9.4% from a year earlier to-2.7% from the previous month.


Total thread inventory fell this week, rigid demand toughness is still in, but the seasonal decline led to a sustained convergence of 0.2 percentage points. The growth of factory and warehouse is still the main factor dragging down the decline of total inventory, the main contradiction between supply and demand in the market is brewing in the upstream, and the inflection point of inventory may be in front of us. On the supply side, the overall level remains high, but there is some differentiation. Among them, the long process steel plant has been dragged down by the falling price due to the fact that the profit of the long process steel plant has been maintained at 400 yuan / ton, the high yield has not been reduced, and the short process steel plant has been dragged down by the falling price. Profits shrank to about 200 yuan per ton (according to the SMM cost table), and the start-up rate fell. On the demand side, due to the recent high temperature and rainy weather and the imminent college entrance examination, site construction is limited this week, so even if Dragon Boat Festival short holiday comes, the terminal is still in a wait-and-see state to pick up goods. The transaction situation continued to decline after a small rise stimulated by low prices on Tuesday, with dealers leaving the warehouse at a low price, so the social database shrank by 0.5 percentage points this week compared with the previous month, and the downward trend of the social database slowed. In the case of general pessimism in the market mentality, dealers reduce the warehouse at a low price, and are not in a hurry to replenish the warehouse, which makes the growth of the factory warehouse reasonable.

[macro and policy aspects]

1. Zhang Yiqun, vice chairman of the China Special Committee on Budget performance: it is expected that the scale of local bond issuance will be further accelerated in June.

According to Choice statistics, as of June 2, a total of 489 local bonds have been issued so far this year, with a total issuance amount of 1.949582 trillion yuan. Zhang Yiqun, vice chairman of the China Special Committee on Budget performance, expects that the scale of local bond issuance in June will be about 500 billion yuan, which will be further accelerated than before. It is expected that the issuance of new local government debt in the first half of the year will reach 80% of the whole year, becoming the largest and fastest issuance period over the years, and will continue to inject capital vitality into China's economic growth in the second half of this year.

two。 State Council: relax the tolerance of non-performing loans in small and micro enterprises from 2 percentage points to 3 percentage points

In order to encourage the development of small and micro enterprises, the executive meeting of the State Council on June 5 clearly proposed to relax the tolerance of non-performing loans for small and micro enterprises from 2 percentage points to 3 percentage points. From the previous relaxation of the tolerance of the defect rate to the scope of "inclusive small and micro enterprise loans" to the fact that all "small and micro enterprise loans" can enjoy the policy, this means that the coverage of this policy will be significantly expanded. It can also help all kinds of small and micro enterprises to solve financing problems.

[summary of major events]

1. Shandong Province issued the Air Pollutant Emission Standard for Iron and Steel Industry, focusing on controlling the pollution emission value of iron and steel enterprises.

A few days ago, Shandong issued the "Iron and Steel Industry Air Pollutant Emission Standard" (DB37/ 990 2019). During the transitional period before the implementation of this standard, the existing enterprises shall comply with the relevant requirements of the Comprehensive Emission Standard of Regional Air pollutants in Shandong Province (DB37/2376-2013) and the Pollutant Emission Standard of Iron and Steel Industry in Shandong Province (DB37/990-2013). Among them, the particulate emission concentration limits of converter (primary flue gas), steel slag treatment and waste acid regeneration in the key control area of DB37/2376-2013 are adjusted to 20mg / m3. The limit of nitrogen oxide emission concentration of ironmaking hot blast furnace and steel rolling heat treatment furnace in key control area was adjusted to 150mg/m3.

Heavy truck sales fell again in February and May

In May 2019, China's heavy truck market sold about 109000 vehicles of various types, down 8 per cent from April this year and 4 per cent from 114000 vehicles in the same period last year.

3. Tianjin: carry out a new round of rail transit network planning, which is expected to be completed by the end of the year

The Information Office of the Tianjin Municipal Government recently held a press conference at which it said that at present, the Tianjin Municipal Bureau of Planning and Natural Resources is carrying out a new round of rail transit network planning in accordance with the requirements of the overall planning of land and space. It is expected to be completed by the end of the year. With the goal of building "Beijing, Tianjin and Hebei on the track", the plan aims to build a multi-mode integrated rail transit network that integrates intercity railways, municipal tracks, urban tracks and medium volume public transport. The number and total scale of rail transit lines in Tianjin will increase.

4. Key points of Beijing's work on the formulation of Beijing-Tianjin-Hebei coordinated Development in 2019

The Beijing Municipal Development and Reform Commission said that Beijing had formulated key points for promoting the coordinated development of Beijing, Tianjin and Hebei in 2019, which was recently issued and implemented. According to the main points of work, in 2019, Beijing will continue to strictly implement the 2018 edition of the ban and restrictions on new industries, adjust and withdraw from 309 general manufacturing enterprises, dredge and upgrade 50 markets and 16 logistics centers. In the key areas of ecology, transportation, industry and public services, Beijing will speed up the preliminary work of the Jingxiong Section of the Beijing-Hong Kong-Taiwan High Speed Railway and strive to start the construction of the Jingxiong Expressway. The Jingxiong inter-city railway (from Beijing West Station to New Airport Station) will be completed and put into operation. The Jingzhang railway will be completed and opened to traffic by the end of the year, and the Yanchong section of the Jingli Expressway will be completed. Beijing Daxing International Airport will be built to a high standard, with completion and acceptance by the end of June and navigation by the end of September.

5. State Administration of Supervision and Administration: 32 production licenses of steel enterprises cancelled

Recently, the State Administration of Market Supervision issued an announcement in batches saying that due to the expiration of the production license, and other circumstances, The State Administration of Market Supervision has decided to cancel the relevant industrial product production licenses of many enterprises, such as Tianjin Taifeng Iron and Steel Co., Ltd. According to statistics, there are a total of 32 enterprises involved in the production of iron and steel products, including Tianjin Taifeng Iron and Steel Co., Ltd., Jiangyin Section Steel Plant, Liyang Sanyuan Iron and Steel Co., Ltd., etc. The steel products include hot rolled steel bar for reinforced concrete, steel for prestressed concrete, bearing steel, cold rolled ribbed steel bar and so on.

6. Harbin: carry out special rectification of violations of laws and regulations in real estate development enterprises

From June 1 to October 31, Harbin launched a special crackdown on violations of laws and regulations by real estate development enterprises throughout the city. Focus on the management of commercial housing without pre-sale qualification without authorization to sell, the sale area "lack of two", the expiration of the contract can not be delivered on time and other violations, in order to create a healthy and orderly real estate market development and management environment.

7. Anhui: strengthen the reserve of major project planning and promote the stable growth of effective investment

Recently, the General Office of the Anhui Provincial Government issued the Circular on further strengthening the Planning and Reserve work of Major projects in the Province, calling for the planning and promotion of a number of key projects and efforts to promote effective investment and stable growth. Give full play to the key role of effective investment in optimizing the supply structure.

8. The Federation forecasts sales of 1.59 million vehicles in June, which continues to show a downward trend.

The Federation forecasts that the overall wholesale passenger car market will reach 1.59 million in June 2019 and 1.56 million in July, continuing to show a downward trend. In addition, the Federation believes that due to inventory pressure, dealers in June promotion price reduction behavior will continue. In terms of market segmentation, the Federation forecasts that wholesale sales in the car market will reach 805000 in June 2019, down 16.5% from the same period last year, but up 1.3% from April. The MPV market will reach 96000 vehicles, a year-on-year contraction of 23.5 per cent, up 4.2 per cent from April. By contrast, the SUV market was the smallest segment, with wholesale sales expected to reach 689000 vehicles in June, down 7.6 per cent from a year earlier and up 3.7 per cent from April.

Weekly review

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