Decline in domestic steel prices continues to pressure the steel market

A few days ago, relevant sources said that if we were to ship, we would ship two to three thousand tons every day. However, yesterday we only shipped 800 tons, which is no way. The market demand is too small.

The reduction in steel demand led to the continuous decline in steel prices. The domestic steel market began a large-scale downtrend from mid-June, accompanied by a wave of price cuts by leading companies such as Baosteel, Wuhan Iron and Steel, and Ansteel. In response, many steel traders have to turn their attention to the start of 10 million sets of affordable housing.

In spite of this, visiting the steel market learned that despite the support of the construction of affordable housing, due to bad news, the trend of the steel market in the second half of the year is still filled with too much uncertainty.

As of the end of May, the actual operating rate of 10 million sets of affordable housing construction this year was only 34%, of which more than 70% of the city's operating rate is less than 30%, leading to this result is the lack of funds. According to calculations, according to the calculation of 50 square meters for each unit, the amount of steel needed for the construction of 10 million sets of affordable housing in the early period is about 12.5 million tons, which is not the same as the annual output of 600 million tons of crude steel.

Iron and steel experts pointed out that it is not possible to overoptimize the construction of 10 million sets of affordable housing. Even if all localities follow the order to start construction, whether the future investment will accelerate the construction progress is doubtful. The relevant personage thinks that for the government’s unreliable thing, the local government can neither build nor build, and is completely in a wait-and-see state. It is hard to say which area can be put in place.

However, the analysts are still optimistic that the construction of social housing is a political task. As long as the central government is determined to do it, it is believed that the local government will actively complete it. The above-mentioned executives from Beijing's steel traders also said that the CPI may have peaked, the macro-control has been controlled, and the current survival of SMEs is generally difficult. I believe the central government will make favorable adjustments.

As an important basic raw material product, the continuous decline in steel prices will also reflect the trend of industrial operations. Industry experts pointed out that the conduction effect of China’s macro-control policies has already begun to reflect on the real economy. Whether it is the automobile, shipbuilding or real estate markets, almost all steel users’ demands have shrunk to some extent. How hard this kind of adjustment situation is and how long it will last, it is difficult to make a conclusion now.

According to the monitoring data, on the 20th to the 24th of June, domestic spot steel prices fell sharply. East China Shanghai and Hangzhou markets led the country down. As of June 24, the 25 major specifications of the country's 28 major markets were rebar. The average price was 4,974 yuan/ton, which was 83 yuan/ton lower than last week.

The personage concerned analyzed that since the “May 1st” holiday, the domestic steel market prices appeared to have “trilogy” ranging from “high price consolidation” to “price differentiation” to “universal decline”. This was reflected in the specific products. No, the difference is different.

According to a trader executive ranked top in the sales of steel products in Beijing, the current downturn in steel prices is somewhat complicated and the varieties vary greatly. At the same time, analysts also said that compared to the sudden drop in construction steel prices in June, the price of sheet metal began to decline from May, and many sheet metal manufacturers have already experienced a loss. The above-mentioned person in charge of sales of large-scale steel mills also confirmed that, for example, in the mid-board industry required by the shipbuilding and machinery industries, the entire industry is currently at the edge of a loss and there is no opportunity for profit.

As the domestic steel market continues to fall, as for steel raw materials, the recent iron ore prices have also dropped. According to statistics, if the 62% grade conversion, Rio Tinto's third-quarter ore price is 168.85 US dollars / ton, compared with the second quarter fell 2.5 US dollars / ton; the third quarter, ore price is 186.67 US dollars / ton, compared to the second quarter It fell 5.91 US dollars / ton.

Analysts said that the fall in steel prices reflects the increase in inventories on iron ore. As of June 20, the inventory of iron ore in China's ports was 92.9 million tons, which was at a historical high, and domestic ore production exceeded 5 in May. Billion tons, which will put further pressure on the price of iron ore.

In addition, domestic steel production remains at a record high of more than 1.9 million tons of Nissan crude steel. China Steel Association estimated on June 28 that the average daily output of crude steel in the country in mid-June was 1,955,400 tons. Relevant persons pointed out that although large-scale steel mills producing sheet metal are generally uncomfortable during the days, the small and medium-sized steel enterprises that depend on construction steel for their livelihood are very enthusiastic and live very moist.

According to the latest data released by the National Bureau of Statistics, China’s crude steel production reached 60.25 million tons in May this year, breaking the 60 million tons for the first time in a single month, hitting a record high; and cumulative production from January to May was 290 million tons, an increase of 8.5% year-on-year. .

However, analysts said that the main reason for the decline in steel prices is caused by both weak demand and financial constraints. Relevant sources said that the shortage of funds is a general reflection of the steel industry. From the perspective of demand, the shortage of funds has also restrained the increase in demand, while traders are eager to ship the goods, which has led to price declines.

For the steel-intensive industry, the constant increase in the deposit reserve ratio will obviously exacerbate the difficulty of its capital circulation. With the release of 5.5% CPI data for May on June 14, the Central Bank announced that the deposit reserve ratio for deposit-taking financial institutions will be raised by 0.5% from June 20, the most intuitive performance being that the sixth time After the money market interest rate rose across the board, the discount rate for steel traders in the Shanghai market quickly rose to the second highest point during the year at 6.91%.

Data show that in the fourth week of June, terminal purchases decreased by 12.49%. From the perspective of the entire lunar calendar in May, the terminal purchase volume data fell by 25.36% compared with the previous month in the lunar calendar, and also dropped by 14.57% compared with the same period of last year. This has also become an important reason for the drop in steel prices this month. In addition, social inventory data provided by various parties also declined.

Steel Steel News learned that people in the industry judge that steel prices are now in a weak consolidation and will continue to fluctuate in the later period. However, in the long run, for example, the trend in the second half of the year is still unpredictable. “This relationship with macro policies and financial policies is too big to clarify.” .

The shortage of funds in the steel industry is considered to be a direct reflection of the macroeconomic regulation and monetary tightening policies of the Chinese economy. "The cumulative effects of macro-control in the first half of this year have already begun to show up in June and July. We expect that GDP in the second quarter may fall from the first quarter and will continue to fall in the third quarter," the official said.

On June 23, HSBC announced that the preview index of the HSBC China Manufacturing Purchasing Managers Index fell to its lowest level in 11 months in June, which was only 50.1, down 1.5 percentage points from May. HSBC said that due to the effectiveness of tightening policies and weak external demand, total demand is cooling. According to data released by the National Bureau of Statistics, the year-on-year growth rate of industrial added value in the first five months of the year was 14.9% (1-2 months data), 14.8%, 13.4%, and 13.3%, respectively. The growth rate showed signs of deceleration.

China's official PMI index was announced by the China Logistics Federation on July 1. A person in charge of sales of large-scale steel plants in East China stated that the PMI index itself is lagging, with 50 points being the recognized profit and loss watershed, and the current data already shows that the situation is pessimistic.

Analysts believe that the Chinese steel industry has been in a state of low profit or loss, so the price falls is very small. On the contrary, iron ore prices have more room to fall. It is expected that the next step will continue to fall. The above-mentioned person in charge of sales of large-scale steel plants in East China believes that the price of iron ore will definitely fall, but the rate of recent decline is slower than expected, which also makes it difficult for the market to judge its future trend. In this regard, the deputy secretary-general of the China Iron and Steel Association Qu Xianmei issued a pessimistic forecast, "iron ore prices will not drop substantially unless the Chinese market demand has significantly decreased."

In terms of sheet materials, plate consumption has been sluggish since the decline in downstream consumerism such as automobiles and home appliances, resulting in losses for sheet companies. At present, the situation of sheet metal also depends on downstream consumption. From the second half of the year, the overall domestic economy may continue to be adjusted. PMI and other indices have been falling, and the sheet metal market will continue to remain weaker than the long products market.

In terms of long products, prior to this, it was once voiced that China's real estate control policy was an important reason for the decline in steel prices. However, the actual situation was that the sales of long products sold by the real estate industry were not expected to shrink. Analysts said that the state regulates real estate prices, not real estate supply. A person in charge of the sale of a large steel company in East China believes that real estate regulation does have a negative impact on steel prices, but it will be offset by the demand for affordable housing.

In addition, the relevant data analysis of the survey, the current macroeconomic impact of steel prices, the overall economic situation of steel companies, capital shortages are not optimistic, coupled with the international economic situation and affordability is also to a certain extent, China's steel exports have been affected, In this situation, the decline in China's steel prices can also be explained in order to facilitate the exchange of future growth.

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