[SMM thread analysis] supply and demand bistable, thread basic support still exists

According to SMM research, in the case of maintenance and production restrictions have not yet cooled, the output of mainstream building materials steel mills in October was 0.45% lower than that in September. As far as the electric arc furnace is concerned, as of today, the operating rate of the electric arc furnace steel plant is 57%. Under the sustained strength of scrap prices, the return to production of the electric arc furnace steel plant is "disillusioned", which is 2% lower than that in mid-September. Therefore, overall, although according to SMM steel statistics, as of today, the reduction of building materials caused by the overhaul of the steel plant in October is 269700 tons less than that in September, and the thread supply side remained basically stable in October.

However, it is worth noting that, on the one hand, with the resumption of production in some maintenance steel mills in mid-and late October, coupled with the gradual fading of the impact of the "most stringent production restrictions" during the National Day period, the supply pressure on the market will increase slightly, on the other hand, the trend of thread prices between regions will show differentiation. Of which:

North China: due to strict production restrictions during the National Day period, coupled with the recent production restriction policy of "seamless connection", the production, shipment and arrival of steel mills have not yet fully returned to normal, and there is still a shortage of specifications, and the terminal demand is relatively stable, so the market mentality is relatively good, and the price support is also relatively stronger.

In Hunan, especially in Changsha, because the local mainstream steel mills "collectively" entered the state of maintenance and production reduction before the festival, the price of building materials also soared 450 yuan / ton under the influence of "shortage". However, "higher than cold", with the recovery of steel production and the inflow of resources in the surrounding low-price areas, the problem of shortage of specifications has been alleviated, the supply pressure is "doubled" than in the early stage, and the price in the later stage will also face greater downside risks.

In addition, according to SMM research, the supply side of southwest China is also under great pressure, especially in Sichuan due to the alleviation of the shortage of scrap resources, electric arc furnace steel mills have basically resumed production, and resources in Shanxi, Shaanxi and other places have also poured into the "peak season."

In addition, with the continuous fermentation of the impact of Wuxi viaduct collapse, recently, various regions have issued notice of strict investigation of overload, a number of steel mills have also responded one after another. Expectations of higher transport costs in the market have also increased.

As far as the areas that issued the notice of strict inspection and overloading are concerned: Tangshan surprise inspection-closure of Hong Kong for three days, however, due to the single-roll transport has been implemented for three months (the freight has increased from 7 yuan / ton to 13 yuan / ton), East China has been under strict investigation since last year, Ningbo, Hangzhou and other places began to implement single-coil transportation in July last year, so generally speaking, there is no great interference with the recent steel prices. In October, the supply side is stable, the demand side is still in the peak season, building materials prices are still strong support.