In October, the demand side was in the traditional peak demand season (compared with the off-season this year), while on the supply side, with the increase of environmental protection and production restrictions in various regions during the National Day, the output of steel mills fell, and the planned output of mainstream hot rolling mills fell 3.37% month-on-month in October, according to SMM. However, spot prices have not rebounded as expected, but have continued to fall since October, and the positive Sino-US consultations have failed to give a strong boost to spot prices, mainly due to two factors. First, during the National Day period, increase the pressure of market inventory; second, the new production line has been put into production, coupled with the poor performance of car data, resulting in a pessimistic market mentality.
Supply side pressure: during the National Day period, the steel mill resources are still being shipped normally, resulting in the continuous accumulation of hot rolling inventory and the increase of market inventory pressure. And the reduction of limited production by steel enterprises during the National Day period has not yet played a role in alleviating the pressure of market supply (reflected in the time difference in the market). At the same time, the steel mill learned that even if the document requires an extension of the production restriction time, the strict implementation of the production restriction is only the National Day stage, so the overall impact is not as expected, so even if the reduction is reflected in the market in the middle and late ten days, it is difficult to alleviate the market supply pressure.
Market mentality: in this year's hot rolling overcapacity, demand is generally weak and the macroeconomic environment is depressed, the market mentality continues to be weak. In addition, even if we enter the peak season, demand is still not prosperous, and new production capacity is still constantly put into production, supply pressure continues to increase, thus aggravating the market pessimism, spot prices have been affected by this many times after the overfall is difficult to rebound.
At the same time, after the National Day, the resumption of production and the increase of new production will lead to the increase of supply pressure in the later stage. According to the feedback of steel plant research, in addition to a small number of steel mills have rolling line maintenance (Baotou Iron and Steel, Angang, WISCO), the production of other steel mills has basically returned to normal, coupled with the current hot rolling production is still profitable (most steel enterprises Maori 100-200 yuan / ton), the production enthusiasm of steel enterprises will not be reduced, so the subsequent hot rolling output will be in a steady state of increase. In addition, the new capacity production line has been a more concerned point in the market. According to SMM research, this part of the production will increase further in November, when the heating season production limit is not clear, and previous documents show that there is a relaxation compared with last year, supply-side pressure is expected to continue to increase.
The specific feedback is as follows.
Shougang: 5500 blast furnace and 1780 rolling line were added in August, and the hot rolling output is expected to be 9-100000 tons in October.
Donghua: the new 1580 rolling line in August is still in the trial rolling stage, with a hot rolling output of 300-500 tons per day, and the probability is expected to be less than 1000 tons per day this year.
Shenglong Metallurgy: 1780 rolling line is expected to be put into production by the end of October, the equipment is basically ready, and the new product promotion meeting is planned to be held at the end of October.
Fuding Yaxin: the 1750 rolling line is expected to be put into production in December and is still in the preparatory stage.
In addition, from a regional point of view, the spot price in the South China market is high, steel enterprises are willing to put in, and the weather is gradually turning cold and northern demand is gradually restrained, so in the case of synchronous increase in new production, the total amount of steel going south will increase one after another and is expected to be higher than the same period last year, so the supply pressure in the follow-up South China market may only increase. The spot price in the East China market is now low, not only is the willingness of steel enterprises to put in low, traders in the case of hanging upside down (Shanghai upside down 6070 yuan / ton as of today), the enthusiasm for ordering is also weak, coupled with the demand situation is relatively stable and stable deviation, so even if the hot rolling output of steel enterprises increases in the fourth quarter, it is expected that the supply pressure in the South China market will not increase greatly.
