Ferrous metals surged as end-user demand continued to be released

SHANGHAI, Nov 18 (SMM) — Ferrous metals continued to rise yesterday. HRC finished the day 1.99% higher at 4053 yuan/mt. Rebar moved over 3,900 yuan/mt, and closed up 2.16% to 3,919 yuan/mt, reaching a two-year high. Long steel prices did not rebound in September, the peak season, and it was not until the National Day that steel prices began to rise. The most-active rebar contract rose from the lowest 3,501 yuan/mt on September 29 to 3,919 yuan/mt yeasterday, up nearly 12%, and HRC rose from the lowest 3,616 yuan/mt on September 22 to 4,053 yuan/mt, up over 12%.

In the first week after the National Day, steel futures rose sharply due to news of frequent environmental protection and limited production policies and RMB exchange rate reaching a new low. During the period, the Ministry of Ecology and Environment indicated that it would promote the implementation of comprehensive air pollution control in key areas in autumn and winter from 2020 to 2021. The project will focus on the heavily polluted weather strongly reflected by the people in autumn and winter this year, keep the direction unchanged and keep the strength undiminished, and achieve "five precisions" in terms of time, area, object, problems and measures, and make an account of the unfinished tasks and reverse the construction period, so as to ensure that they are fully completed before the end of the year. Steel products such as rebar and HRC rose due to the news.

At the beginning of this month, under the background of intensified contradiction between spot coke supply and demand, the current prices went up synchronously. In addition, the sixth round of coke increase officially started at the beginning of this month, with an increase rate of about 50 yuan/mt. The tight spot supply and demand of coke and the official opening of the sixth round of increase will promote the whole ferrous metals industrial chain in the near term.

Recently, steel inventories continued to fall, and the data of infrastructure and real estate were better than expectations. The macro data released by the Bureau of Statistics yesterday showed that the economy continued to recover steadily, and the investment in real estate development increased 6.3%, 0.7 percentage points faster than that in January-September. It shows that real estate still has strong demand for long steels. For January-October, the national fixed asset investment increased 1.8% year on year, 1.0 percentage points faster than that from January to September. The recovery of fixed assets investment, consumption, infrastructure investment and other data once again supported ferrous metals. Moreover, the "water penetration" incident narrowed the supply and the end-user demand broke out since October, so spot prices in Hangzhou continued to strengthen, which became an important driving force leading the current national rebar prices to surge.

SMM believes that social inventories of rebar will drop to the same level of last year from the end of November to the beginning of December. Therefore, although stocks began to decline in the past two days after the surge of prices, there is no downward driving force in the near term under the good fundamentals. In terms of HRC, most markets have recently reported that the demand for thin coils and cold-rolled coils continues to be high, which is mainly due to the high export boom of home appliance industry and the rigid demand led by the arrival of the peak season of production demand in automobile industry at the end of the year. It is expected that the stable and high demand for HRCs is expected to continue until the end of the year, supporting the continuous decline of inventories as well as the spot prices to some extent.