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In the wind and rain of limited production, what is the "reverse trend" of thread production?
Jul 18,2019 18:47CST
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Source:SMM
The content below was translated by Tencent automatically for reference.

Since the middle and late June, there has been a lot of news about environmental protection and production restrictions across the country. However, contrary to market expectations, thread production rose again this week, thus helping to continue the double increase in the social database of thread factories this week. The growth rate has been expanded. According to SMM statistics, this week the thread matrix is 8.3139 million tons, an increase of 238600 tons over the previous week (an increase of 175800 tons last week). As soon as the data came out, the market sentiment fell into a trough. Futures prices both fell. So, under the heavy hindrance of environmental protection and production restrictions, why is thread production going up again this week?

First of all, the enthusiasm for thread production in steel mills has not diminished.

As for long process steel mills, although under the strong push of raw material prices, this year's long process steel mills are not as good as the same period last year (since the beginning of the year, the spot price of iron ore has soared from 500 yuan / ton at the beginning of the year to 900 yuan / ton or so. At the same time, coke prices have not declined. Recently, under the influence of environmental protection and production restrictions, some Hebei coke enterprises raised coke prices by 100 yuan / ton), but in a small profit, Thread profit has always occupied the first place in Pugang (as of today, estimated by 121.7 US gold mine, the thread profit of long process steel plant is 339yuan / ton, down 583yuan / ton from the high level after the year), in this case, the thread production line of steel plant has always maintained a state of full production. According to SMM research, in July, in addition to Hebei steel enterprises affected by environmental protection policies to passively reduce production, the production of mainstream steel mills in various parts of China, especially in East China, continued to increase. Electric arc furnace steel mills, into July steel prices stimulated by limited production, electric arc furnace steel mills after a short period of loss began to make a profit again, according to SMM research, the electric arc furnace steel mills in South China are still on the edge of profit and loss, but the profit of electric arc furnace steel mills in East China is 100 to 200 yuan / ton, some production-reducing steel mills have resumed production, but also contributed to part of the thread output.

Secondly, some steel mills have been overhauled and resumed production. According to SMM statistics, according to the current public maintenance information of steel mills, the impact of building materials overhauled by steel mills in July was 249000 tons, mostly concentrated in the resumption of production from 11 to 14 July, which also increased thread production.

In addition, after Tangshan announced the July production restriction policy document at the end of June, the production restriction policy was updated on July 2-some steel enterprises (Huaxi Iron and Steel, etc.) can no longer limit production after July 15.

However, it should be noted that thread production continues to push up may be difficult to continue. On the one hand, on July 15, Fengrun District of Tangshan City issued a plan for strengthening the prevention and control of air pollution in the second half of July, requiring all independent rolling mills in the area to be closed, or obstructing the supply of building materials. On the other hand, under the rising scrap price, the profit situation of some markets such as short process steel mills in South China is not optimistic, and the thread supply of electric arc furnace steel mills may be reduced (according to the SMM data model, as of today, with the calculation of 2350 yuan / ton tax scrap steel price, the electric arc furnace steel mills have re-entered the loss, losing 6 yuan / ton). In addition, according to SMM research, according to the use cycle of iron ore inventory retained by long process steel mills, if steel prices continue to remain weak and stable, the profits of steel enterprises in some areas will shrink again, or even enter a state of loss, and the "overhaul tide" of steel mills may come again.

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