"Twelfth Five-Year Plan" Good for Long-term Steel Prices Will Callback in the Near Term

The domestic market for goods and stocks has risen loudly recently. Driven by this atmosphere, since the National Day after 1105, the main contract of Shanghai Steel rebounded sharply. The promoters of this round of the market were the depreciation of the US dollar and the sudden increase in the pressure for the appreciation of the ***. The rush to rise also increased the demand for the callback. The newly issued "12th Five-Year Plan" has immediately become the focus of the market.

The core task of the "Twelfth Five-Year Plan" - the adjustment of economic structure is not only the structural adjustment of industries with excess capacity, but also the real estate industry is the number one regulating industry. The Ministry of Land and Resources has clearly stated that real estate will no longer be a pillar industry. The recently introduced "restricted purchase order" policy will have a certain degree of suppression of self-occupied demand and investment demand in the short-term. However, the housing itself is a shortage of goods, restrictions on purchase orders or restrictions on loans can not fundamentally solve the problem of housing supply in short supply, and the prohibition of off-site purchase will further strengthen the ** system's control over people, so the current purchase order may not be a long-term Policies, the "Twelfth Five-Year Plan" will also introduce new real estate control policies. The real estate tax and property tax that have been brewing have not yet been clear. However, it can be confirmed that the supply of affordable housing will continue to maintain steady growth. Ye Qing, deputy director of the Bureau of Statistics of Hubei Province, said that during the 12th Five-Year Plan period, 6 million sets of affordable housing will be built each year, which is 30 million units in five years. However, this is far from enough! Authoritative sources claim that the urbanization rate in China will exceed 50% during the “12th Five-Year Plan” period. At that time, the housing problem of the agricultural population entering the city is not a solution to the 30 million sets of affordable housing. How to increase the supply of houses and stabilize housing prices is even more urgent. The acceleration of the pace of urbanization will increase the demand for construction steel. According to the calculation of a small high-rise building of 90 square meters, the amount of steel used for 30 million sets of affordable housing is conservatively estimated at more than 130 million tons. Therefore, considering the above analysis, the author believes that Shanghai Steel will oscillate upwards during the 12th Five-Year Plan period.

In addition, the Fed announced that it will implement a new round of quantitative easing policy, but its details have not been released. Bernanke also reminded the market of the "costs and limitations" of this policy. He said that the uncertainty of the risk of further purchases of long-term securities policies cannot be quantified, and the market should be convinced that the Fed has the ability to withdraw from loose monetary policies when appropriate. The market focus has thus quickly shifted to "costs and limitations." The continued weakness of the U.S. dollar has forced many countries’ currencies to quickly appreciate. Therefore, before the G20 Seoul summit in November, perhaps more countries and even the euro zone will join in the intervention of the exchange rate. During this period, the depreciation rate of the U.S. dollar will slow down and rebound briefly. In the early period, the rise in the prices of commodities and stocks, including steel products, may also drop.

Shanghai Iron and Steel prices have a short-term risk of a correction. The upward resistance of the main contract of 1105 is around 4575 yuan/ton, but the mid- to long-term prices are still expected to oscillate upward.