Since November, the steel market as a whole out of a sharp price rise, a number of steel prices have reached 10%.The remarkable characteristic of this round of rise is to rise greatly, range is wide, period rises synchronously now, belong to typical “prosperous tendency”.The current rise is different from the steel market in June and July this year, the former is cost-driven, while the current rise is demand-driven.Demon-driven is shown in several aspects: first, the demand delayed by the rainy season is now released; second, the downstream industries such as manufacturing industry still have the need to rush; third, the incremental demand stimulated by the rising steel price.
At the same time, steel cost remains high, coke price has achieved 7 rounds of rise, profit per ton of coke has exceeded profit per ton of steel, and the price of imported iron ore once returned to 130 US dollars per ton.This makes the steel mill pull up the willingness of the material prices more urgent and strong.On this basis, the spot market has performed more aggressively than the futures market, prompting the basis to widen.However, the futures market also “not to be outdone”, hit a new high since the beginning of the year.
The problem is that it is now in late November and the spot market has stopped rising. The market will also face many problems such as colder weather, reduced demand, operation of “winter storage” and replacement of main futures contracts. Can the market maintain such a rise in December?In my opinion, this needs to be considered comprehensively from the following aspects.
First, whether the fundamentals of supply and demand will change.To be sure, although environmental protection production limit has a certain impact on the regional market, but the actual impact on the national total production is not big.Statistics from industry institutions show that last week (November 16 ~ 20), the national blast furnace operation rate (163 sample steel mills) reached 62.27%, with a month-on-week decrease of 0.13%.The capacity utilization rate of steel mills in Tangshan area of Hebei reached 80.63%, with a month-on-week decline of 1.67%.However, the output of the five steel varieties reached 10.75 million tons, with a weekly increase of 67,000 tons, including a weekly decrease of 60,600 tons of construction steel and a weekly increase of 127,600 tons of plate production.In addition, data from the National Bureau of Statistics showed that China’s crude steel output reached 92.202 million tons in October, down slightly from the previous month, but still up 12.7% year on year.According to this judgment, when it is difficult for the demand to increase substantially in the later period, the supply-demand relationship of market fundamentals may change from “weak supply and strong demand” to “strong supply and weak demand”.
Second, the pace of destocking has slowed, and steel inventories may increase in December.Since November, the pace of market destocking has accelerated, from a weekly decline of 800,000 tonnes to 1.5m tonnes and then 900,000 tonnes.The main reasons for the acceleration of destocking are as follows: first, the price rises and the psychological stimulus brought by the strong performance of the futures market;Second, there is still a manufacturing downstream enterprises to rush the demand, construction steel demand continues to exceed expectations.
However, from the construction steel turnover data, last Monday (November 16) hit a significant number of more than 300,000 tons, followed by four days of turnover of less than 220,000 tons, a significant decline.From the perspective of the north-south difference in the demand for construction steel, the demand in North China has been in a downward trend relative to September, and the purchase volume of Hebei Xiongan New Area has not been able to exceed the average monthly level in the third quarter of this year.With the increase of low temperature, rain and snow in the later period, the release of demand gradually weakened, and the destocking speed slowed down is a matter of great probability.I expect steel inventories will start to increase in the middle of December.At present, rebar inventories are still much higher than the same period last year, and it is expected that by the end of this year it will be difficult to fall to the same level last year.
Third, the main futures contract to move positions for months, will bring fluctuations to the spot market trend.Behind of price of future goods take a rise, what reflect more is the driving force of capital.The most obvious is coke futures, which rose 500 yuan/ton within one month, hitting a new high in nearly three years, and formed a significant premium to the spot.With the main contract moving position change month, the price fluctuations will be more obvious, the speed of market change will also accelerate, which will affect the spot market in the mood, mentality.
In a word, although the current steel price is at the high level since the beginning of this year, it still needs to observe the acceptance of the market demand side under the high price, as well as the market volume, steel inventory changes, futures fund game and mentality and other factors.The author thinks, the difficulty that steel price continues to rise in December is bigger, high fluctuation is unavoidable, but steel price also does not have the condition that falls sharply.
