[SMM thread] supply is still under pressure, but inventory suggests demand is expected

This week, the country's total inventory of building materials was 13.031 million tons, a month-on-month rate of-6.3%, a slowdown of 1.3%, an increase of 53.0% over the same period of the Gregorian calendar last year.

Building materials national inventory continued to decline this week, during the May Day holiday terminal pick up goods decreased, leading to a slowdown.

Table 1: thread inventory

Source: SMM

Table 2: comparison of thread inventory prices from 2018 to 2020

Note: due to the epidemic factors since 2020, due to the different opening times in different places, there is a certain error in the actual spot average price; in addition, since this week, the time dimension has been adjusted to the Gregorian calendar date.

Source: SMM

Specifically:

The inventory in the plant was 3.82 million tons, down 317000 tons from the previous month, or-7.7% from the previous month, a decrease of 1.2 percentage points, or + 81.9% from the same period last year.

This week, the factory warehouse is still degenerating faster than the social storehouse. In addition to steadily shipping goods to the terminal during the holiday period to help push the warehouse down, the reduction in the output of electric furnaces is also an important reason for the rapid reduction of storage speed. According to SMM, recently some electric furnace steel mills have been affected by difficulties in purchasing scrap steel, and some markets are even in short supply. The shortage of raw materials has forced them to reduce production. In addition, the purchase price of scrap steel has been rising, and profits have been compressed more seriously than in the early days. Production momentum has weakened.

Figure 1: an overview of the trend of thread factory warehouse from 2016 to now

Source: SMM

Social inventory was 9.211 million tons, down 558000 tons from the previous month, or-5.7 percent from the previous month, down 1.3 percent from the same period last year, or + 43.5 percent from the same period last year.

During the holiday period, the social base still remained demineralized, only narrowed, indicating that demand toughness is good, with the prices of billets and other raw materials rising, the market cautious mood has continued to ease, the section shipment is better.

Fig. 1: a list of the trend of thread social bank from 2016 to the present

Source: SMM

Since the end of the festival, the terminal concentrated stock, the main force of the superposition period snail all the way forward, after the festival trading atmosphere is better, it is expected to accelerate the reduction of storage next week. The new output of long-process blast furnace steel mills can not be ignored, but the good demand leads to the stable elimination of inventory and supports the price, so the spot price has the risk of pullback in the short term, but the lower space is limited.