[SMM analysis] can the off-season price of steel market continue to reach a new high of 2 months?

SMM7 March 14 News: entering July, due to high temperature and rainstorm is the traditional steel demand off-season, but recently the thread hot roll is out of the "off-season is not light" market. At the close of the day, the main thread continued to rise 2.86%, and the main hot coil rose 2.6%. Snail futures both hit two-month highs.

"check the metal futures market.

Recently, production restriction has once again become a key word in the industry. Zhao Penggao, deputy director of the Environmental Resources Department of the National Development and Reform Commission, said yesterday that China will vigorously promote the adjustment and optimization of the industrial structure, firmly curb the blind development of the "two high" projects as the current focus of work, strictly control incremental projects, and speed up the transformation and upgrading of existing projects. we will "look back" on the elimination of steel and coal production capacity in a down-to-earth manner, and strictly prevent the resurgence of excess capacity.

From July 14 to July 16, the third inspection team of iron and steel production capacity rushed to Jiangsu to investigate some steel mills and machinery plants. it is understood that at present, some steel mills in Jiangsu have received the requirement that their output does not exceed that of last year.

In addition, according to SMM, since June, Hebei, Hunan, Anhui and other places have begun to implement or formulate production reduction plans for the iron and steel industry, and a number of steel mills have begun to overhaul and stop production and limit production, of which steel mills have reduced production by 70% and 80%. SMM will continue to follow up the production reduction requirements and plans of subsequent steel mills.

At present, many places have issued policies to limit steel production in the second half of the year, superimposed iron ore and other raw material prices remain volatile, steel prices have rebounded continuously, steel mill profits have also rebounded significantly, and the profits of some varieties have exceeded 600 yuan / ton. SMM data show that as of July 13, the profits of long-process rebar mills, long-process hot rolling mills and electric furnace rebar mills were 137 yuan / ton, 604 yuan / ton and 256 yuan / ton respectively. The steel market is not weak in the off-season, and the profits of steel mills begin to pick up.

Profit of long process rebar, hot rolling and electric furnace rebar

In the short term, the current production limit policy landing period, the price bottom support is strong, the China Iron and Steel Association ten-day crude steel production data confirmed that the current domestic steel production reduction has gradually landed, the fundamentals of supply and demand continue to improve. According to SMM research, other provinces and cities that have not yet introduced production reduction policies are already planning follow-up policies. although it is the off-season of steel demand, steel prices are expected to be under pressure to rise under the stimulation of strong expectations and bullish news.

But in the medium to long term, the demand side is still dragged down by high temperatures and rainy weather. The market is still trading the game between strong expectation and weak reality under the expectation of limiting production. In the later stage, it depends on the cycle of the policy landing, if the policy landing time is long, and the steel mill production reduction plan is slow, prices may remain strong until the peak season.