SHANGHAI, Jun 21 (SMM) - On the supply side, the profits of steel companies continued to shrink affected by the sharp drop in finished products prices, dampening the production enthusiasm. A large number of steel companies took this opportunity to suspend the production or carry out maintenance in order to minimise losses. It is expected that the supply will decline slightly in the short term until the operating conditions of steel mills improve. On the demand side, the flood in the south and the high temperature in the north suppressed the recovery of terminal demand. The sharp price drop in the past few days encouraged some traders to buy on dips, creating the speculative demand. But the bearishness will remain in place until the terminal demand fully recovers. The Ministry of Industry and Information Technology announced that it plans to introduce a series of effective policies to stabilise the economic growth, which will provide bullishness for the market to a certain extent and boost market confidence. The macro policies may help to boost the demand, but the bearish sentiment is expected to haunt the market in the short term, and the demand will remain weak.
In the future, the flood in the south and the drought in the north may still suppress the terminal demand. The decline rate of steel prices will fluctuate in a negative correlation with the scale of production restrictions and maintenance of steel companies when the supply drops slighlty. It is recommended to maintain low inventory and then increase positions slightly after the current round of correction. In the long term, a bullish macro front will boost the demand, and it is expected that steel prices will further increase.
