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Waiting for "need" and anticipating whether it can shine into the reality and lead the trend of the black system.
Sep 7,2020 09:43CST
translation
Source:Futures daily
The content below was translated by Tencent automatically for reference.

SMM News: global financial markets out of a new round of risk aversion, U. S. stocks plummeted, NASDAQ once hit a circuit breaker, the performance of the dollar is weak, black is a pullback. Recently, steel prices have maintained oscillatory adjustment under the supply and demand pattern of "high output, high demand expectations and high inventory", while iron ore prices have maintained high oscillations under the pattern of "high supply, high demand and high basis difference". With the advent of the "Golden Nine and Silver Ten" demand season and the approaching of the construction site demand, the steel demand side has entered a new stage of verification between expectation and reality. In the later stage, we need to focus on whether the demand can break out as scheduled to promote the black system to rise again, and whether the tightening policy of production restriction can effectively compress the supply side.

The high supply pattern of steel is difficult to ease in the short term, and the demand for raw materials falls but remains high.

Judging from the start-up situation of steel mills, the operating rate and capacity utilization rate of blast furnace have declined at a high level, and the average daily hot metal output of 247 steel mills has also dropped from a high level, but it still has a certain increase compared with the level of the previous two years. The weekly output of rebar is also maintained at a high level in the same period in history, in which the output of both long and short processes is at a high level. This week's rebar output is 17000 to 3.8232 million tons on a monthly basis, with an increase of 12.95 per cent compared with the same period last year.

At present, it is estimated that the profit per ton of long thread steel in East China is about 70 yuan / ton, and that of Gu Power in East China is about 80 yuan / ton. the average profits of Gu Power and Ping Dian basically fluctuate around zero. The current profit level of steel mills is not enough to have a significant impact on the production rhythm, thread output is expected to continue to maintain a high level over the years, and raw material demand is still supported, unless there are effective strict production control measures to intervene.

Move for "need"

It is estimated that the weekly apparent consumption of rebar has increased by 264700 tons to 3.8263 million tons this week. In the first four days of this week, the daily average trading volume of major traders in building materials across the country was 230600 tons per day, an increase of 16500 tons over the last week of August. The strong steel price before September mainly comes from the expectation of demand. since September, with the advent of the peak season of "Golden Nine Silver Ten", the downstream demand of construction steel has gradually begun to pick up, and whether the demand expectation can be successfully fulfilled will become the key factor affecting the trend of the market. Demand expectation is still the most powerful support for steel prices.

The pressure of steel inventory is not reduced.

According to data, the social inventory of rebar in 35 cities increased by 135400 tons to 8.9162 million tons last week, up 51.8% from the same period last year, while the inventory of steel mills decreased by 138500 tons to 3.6679 million tons, up 48% from the same period last year. The total rebar inventory decreased by 3100 tons to 12.5841 million tons month-on-month, 50.7 percent higher than the inventory level in the same period last year. Judging from the current absolute high level of inventory, it is still difficult to digest inventory, and whether the inventory pressure can be effectively alleviated depends on the actual situation of "Jinjiu Silver Ten".

The prices of iron ore and scrap are strong, providing cost support for steel prices.

Over the past month, the spot price of iron ore has continued to fluctuate at a high level. The 2101 contract basis difference and 62% even iron price difference of iron ore are at an all-time high level. On September 3, the contract basis difference of 2101 of connected railway calculated by gold Bubba powder is about 150 yuan / ton. According to PB powder, the contract basis difference of 2101 of connected railway is about 173yuan / ton, and 62% of the contract price difference between Liantie 2101 and Liantie 2101 is about 182 yuan / ton. From the current spot price difference and the level of internal and external price difference, short-term mineral prices still have a certain support, short-term fall is not easy. From the perspective of the supply and demand pattern, the current iron ore overall presents the characteristics of booming supply and demand, and the supply is gradually becoming loose. the iron ore shipping level in Australia and Brazil has basically returned to a higher level in the same period over the years, and the hot metal output of steel mills has been maintained at a high level to support iron ore demand. Port inventory has recently rebounded from low levels, the increase in powder inventory is obvious, and the marginal relationship between supply and demand has loosened, but there is still some room for the same period last year. Unless the tightening of environmental production restrictions can have a direct impact on iron ore demand, the relationship between supply and demand will not be too loose, and the marginal support of iron ore prices will not be too weak.

In terms of scrap, the data show that the average daily delivery of scrap in 147steel mills across the country is about 331200 tons from August 29th to September 3rd, an increase of 19300 tons over the average of the previous week, keeping a high level in the same period; from August 21st to August 27th, the daily consumption of steel mills is about 358200 tons, an increase of 2700 tons over the previous period, and the daily material consumption of long-process and short-process steel mills has returned to positive growth compared with the previous period. Scrap steel also maintains a prosperous pattern of supply and demand. Steel mill scrap arrival and daily consumption demand have both rebounded to high levels, and steel mill inventory has declined slightly for two consecutive weeks, indicating that the current cycle-to-cycle ratio of supply and demand structure has slightly improved, and there is also some support for scrap prices in the short term.

To sum up, the rebar market as a whole shows the "three high" characteristics of "high output, high demand expectation and high inventory". In the case of no obvious improvement in demand, the upward power of steel price is insufficient, the overall margin of supply and demand is loose, and the steel price oscillates and adjusts. In September, the "Golden Nine Silver Ten" demand peak season and the expected realization of the construction period ahead of the site heating season will become the key factors to re-evaluate the supply and demand pattern, focusing on the situation of environmental protection and production restrictions. The impact on the demand side will be better than that on the supply side, and the black system is waiting for "demand".

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