SHANGHAI, Jan 27 (SMM) - On the supply side, the restrictions of domestic steel production in 2022 have not yet been clarified. It is expected that the blast furnace (BF) mills in south China may maintain normal production. However, the profits and sales of steel plate/sheet have been slightly better than those of rebar recently, and the production enthusiasm for rebar has weakened slightly.
In the short term, it is expected that the output of rebar will remain at a low level in February under the influence of factors such as the production restrictions for Beijing Winter Olympics, the early holiday of electric arc furnace (EAF) and rolling mills that produce rebar, as well as the slow resumption of production.
In terms of demand, the terminals and steel traders are on holiday one after another approaching the CNY, and many markets have been closed, hence the demand is basically stagnant. In the medium and long term, the People’s Bank of China cut the one-year and five-year LPR, which will help revive the supply and consumption ends of the real estate market. The director of the Financial Market Department of the People's Bank of China said that recently, the real estate sales, land purchases, financing and other activities have gradually returned to normal, and market expectations have improved steadily. The Bureau of Statistics also stated that the investments in infrastructure construction are being carried out ahead of time when deemed appropriate, and significant projects in many places have started intensively. According to the government work reports that have been released of local authorities and the 2022 work plans announced by the development and reform commissions of various places, it has become a key task to actively promote the construction of projects and ensure that the investment in the first quarter. Hence the post-holiday demand can be expected.
On the whole, the short-term spot prices may remain stable and run in a narrow range. And with the recovery of demand post the CNY holiday, the prices of steel will show upside potentials. However, a slow recovery in the real estate sector will limit the upside room of prices. The international market has been relatively turbulent recently, and the market shall stay cautious about the influences of the peripheral markets. The SMM average price of rebar was 4,746.3 yuan/mt as of January 25, and is expected to move between 4,650-5,250 yuan/mt post the CNY holiday.
