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[SMM thread] can steel prices continue to rebound when the speed slows down?
Jul 9,2020 20:59CST
The content below was translated by Tencent automatically for reference.

July 9, SMM7: this week, the threaded stock continued to accumulate under the continuous interference of seasonal precipitation, but due to the decline of production, the improvement of terminal demand due to the improvement of the epidemic in the north and the rain in the south, and the expected strength of the market, the rate of inventory accumulation slowed significantly this week. As of July 9, the total inventory of building materials nationwide was 10.6759 million tons, with a month-on-month ratio of + 0.7% and a year-on-year ratio of + 32.2%.

Table 1: Overview of 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; the time dimension is the Gregorian calendar date.


Source: SMM


Social inventories are 7.3284 million tons, an increase of 135900 tons this week and 241900 tons last week, an increase of 1.6 percentage points, or + 26.9 percent year-on-year.

In this period, the speed of social inventory accumulation has slowed down, mainly driven by the recovery of terminal demand in some areas. The recent precipitation in South China, which was previously affected by rain in the south, has been reduced recently, and the recent epidemic situation in the north has been gradually brought under control. in addition, at the end of the first half of the year and into July, the improvement of the return pressure on some construction sites is also an important factor.

Figure 1: an overview of the trend of threaded community library since 2016


Source: SMM

Factory inventory of 3.3475 million tons, down 62400 tons this week, an increase of 226600 tons last week, + 45.4% year-on-year.

The increase and decline in the inventory of building materials factories across the country this week is mainly due to the decline in output, the partial recovery of terminal demand and the increase in the enthusiasm of traders to take goods. On the one hand, the output of steel mills has dropped somewhat. According to SMM research, the national blast furnace operating rate this week was 90.1%, down 0.06% from last week, and the operating rate of independent electric arc furnaces was 73.24%, down 4.49% from last week. On the other hand, direct supply orders from steel mills in some areas have recovered, including downstream demand in South China, where the epidemic is gradually coming out, and in the north, where the epidemic is gradually under control. Finally, market expectations for a rebound in demand after the rainy season have increased, superimposed by the recent outstanding performance of the stock market, market expectations for economic restart have also improved, the mentality of traders has been repaired, and the enthusiasm of picking up goods has increased.


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

Source: SMM


In the later stage, on the supply side, production has reached a phased top and began to decline, while on the demand side, demand, which is weakened by seasonal effects, began to bottom out. Overall supply and demand across the country are both weak, and demand in some areas is the first to rebound. At present, the situation of rising steel prices across the country may face pullback pressure or regional differences-construction of construction sites in some areas is still restricted by rain. according to SMM collation of weather conditions in key cities in July, the middle and lower reaches of the Yangtze River and the eastern southwest are still shrouded by rain, and the price support driven by the recovery of terminal demand will take time. On the other hand, steel prices in areas weakened by rain have a relatively stronger driving force.

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