[SMM Analysis] the requirements are not "virtual"-when will the terminal requirements "arrive"?

The end demand for rebar this year seems to be particularly worrying-a "doomed" extraordinary Boxer year, with torrential rains, flood seasons and epidemics. The market finally waited for the epidemic to stabilize and opened its arms to meet the demand for the return of "retaliation". It did not want the flood season to follow, and South China, Southwest China and East China fell one after another-since July, according to the statistics of the Emergency Management Department, floods have occurred in 336 rivers in China above the warning water level, of which 115 rivers exceed the guaranteed water level and 38 exceed the historical water level.

Figure 1: flood conditions in various places

In this case, SMM conducted a detailed study on the current situation and future construction of more than 100 real estate (31% of the total sample) and infrastructure (69% of the total sample) industry according to the terminal demand. Specifically:

Under the shock of Rain Water's weather, the pace of construction was dragged down, leading 32.7% of the sample enterprises to say that the overall terminal steel procurement demand in July was significantly lower than that in June. Today, some sample enterprises in areas not affected by the "rainy season" such as North China (9%) said that steel purchases increased slightly, driven by rush demand.

With regard to the situation in August and even the second half of the year, which the market is most concerned about, the demand-side support is not at all "empty".

On the one hand, 38.2% of the terminal sample enterprises said that steel purchases will increase in August compared with July. In terms of sub-industry, 41.2% of infrastructure enterprises said they had this expectation, while 36.8% of construction enterprises said they expected the same increase in procurement volume next month.

In addition, 52.7% of the sample enterprises indicated that there were new project orders in the next three months, and 47.4% of the enterprises said that there was a certain rush demand at present.

Table 1: summary of the specific survey of the terminal in July

Source: SMM

As for the problem of shortage of funds, it is indeed quite common. In the course of the survey, about 40% of enterprises said that there was a problem of shortage of funds at present, but at the same time, the problem of shortage of funds in most enterprises was a long-term problem, not overnight: only 5.5% of enterprises said that the problem was so serious that it would affect the construction of projects under construction or directly lead to the postponement of the construction of new projects.

Taken together, demand is expected in August. Under the condition that the production of steel mills is basically stable, the fundamentals of steel, especially rebar, are showing a marginal improvement, and the bottom support of its price is also gradually strengthening. Although there is still a high inventory scale to suppress in the short term, but after the replenishment of demand, the inventory has been removed to reach a healthy range, and it is imperative for steel prices to rise.