Xirong talks about CAI steel market will turn salted fish over?

The long-dormant steel market has recently ushered in a surge that has not been seen in many years. In this regard, Chen Wei, sales manager of Wuxi Jinzhou Steel Pipe Sales Co., Ltd., put forward his own views to reporters, saying that the sudden rise in steel prices was mainly due to factors such as low starts and low inventories in the early stage.

In addition, the rise in house prices is also one of the factors that lead to the rise in steel prices, due to the

rise in house prices, the market is generally optimistic about the future development trend of real estate, real estate investment enthusiasm is relatively high, real estate project operating rate increases, downstream demand increase led to steel prices. However, he also pointed out that the rise in prices does not mean a full recovery of the digestion capacity of China's steel market, and the wait-and-see attitude to the steel market in the later period still needs to be cautious.

The steel market is like a roller coaster

It is reported that from March 3 to 8, the quotation of 150 carbon billet in Tangshan area of Hebei Province continued to rise for five consecutive days, and in less than a week, the total price of carbon billet rose by 360 yuan / ton, an increase of up to 20%. In addition, Tangshan rebar and hot rolling also rose by 307 yuan and 280 yuan respectively, an increase of 14.47% and 8.04% respectively.

Compared with the steel price in Tangshan, the steel price in other regions is also "not to be outdone". According to the relevant data of the institution on March 8, the quotation of cold-rolled coil produced in the Shanghai market for Angang was 3330 yuan / ton, an increase of 200 yuan / ton compared with March 7, and an increase of 450 yuan / ton compared with 2880 yuan / ton on March 4.

On an e-commerce platform, the price of almost all types of steel, including hot coil, medium and heavy plate, and cold plating, has increased significantly. In the week from March 1 to 8, the price of Puquan rose from 2025 yuan / ton to 2439 yuan / ton, a cumulative increase of more than 400 yuan / ton, an increase of 20%.

In this regard, metallurgical industry researcher Yuan Zhibin said in an interview with reporters that the recent sharp rise in steel prices is due to many reasons. First of all, the rise in raw material prices has led to a consequent increase in steel prices; Secondly, the recent downstream construction sites have gradually started, some infrastructure projects have also entered the construction stage, steel demand has increased, coupled with steel companies have been controlling shipments, steel inventories have declined significantly, low inventory, high demand to support steel prices rise; Finally, the rise in steel prices has increased market confidence, market volume is active, and trading prices have risen.

However, just one day later, on

March 9, the price of Tangshan strip plummeted by 350 yuan / ton in one day, and the billet price fell from the peak of 2260 yuan / ton on March 8 to 1860 yuan / ton, and the decline was 400 yuan / ton in less than 24 hours. On the same day, steel prices across the country also fell, and after the rise in steel prices in the Beijing-Tianjin-Hebei market, some steel traders rushed to ship, resulting in a continuous decline in steel quotations. The price of Beijing-Tianjin building materials fell from 2400 yuan / ton to 2200 yuan / ton, and the price of hot coil in Tianjin fell from the peak of 2700 yuan / ton on March 8 to 2300 yuan / ton, and the daily decline also reached 400 yuan / ton. Iron ore prices have also suffered from Waterloo, and as of March 11, international iron ore prices have fallen back to $56.2/ton. In this regard, Chen Wei said that steel prices have soared sharply in the short term, the foundation is not solid, the demand for rational adjustment is getting stronger and stronger, as the end date of the value preservation policy of each steel mill is approaching and the price of snails falls, some merchants in the spot market are panicked, selling goods wantonly, and the price of building materials products naturally declines.

The situation behind the madness is more complicated

Some insiders pointed out that the steel price has seen a rare surge in the past five years, and from the weekly increase, it has set a record for steel price growth in 20 years. Chen Wei believes that the national production capacity, the central bank's reduction of the reserve requirement in the early stage, the low market inventory after the holiday, the relatively large suspension of production, the Tangshan World Horticultural Expo and the convening of the two sessions, etc., are all factors that affect the sharp rise and fall of steel prices, and the low market inventory after the holiday is one of the main reasons for the surge in steel prices.

In 2015, China's economy was down, and the downward situation of the steel industry was more serious. Many loss-making steel mills have adopted the method of reducing production and stopping production in response to the crisis of market contraction and overcapacity. According to the statistics of the China Steel Association, in January 2016, the daily output of crude steel in the country was 2.08 million tons, down 5.5% year-on-year; In January 2016, the average daily output of crude steel was 2.04 million tons, down 7.8% year-on-year. Both crude steel production in absolute terms is the lowest since 2013, and the decline has reached the highest year-on-year peak since 2009.

As of the 4th of this month, China's steel social inventory was 10.9544 million tons, a decrease of more than 25% compared with the same period last year, which is the lowest level in recent years. Chen Wei believes that in recent years, China's steel industry has shrunk, and many steel mills that are struggling to support have adopted low-inventory operations to reduce expenses under the situation of falling steel prices, resulting in a sharp decline in the overall social inventory of steel. According to the survey results of the website "My Steel" on 216 steel producers across the country, domestic steel production continued to decline in February this year, and the actual capacity utilization rate fell by 3.2% month-on-month. The overall social inventory is insufficient, coupled with the resumption of work in all walks of life after the holiday, especially the recovery of the national property market, so the surge in steel prices is not for nothing.

With the skyrocketing price of steel, many steel companies that have stopped production and reduced production have begun to resume work on a large scale. According to the relevant statistics of China United Steel Network, compared with the effective operating rate of 164 blast furnaces in Tangshan that has dropped to 81.47% before the Spring Festival, as of March 4, this figure has risen to 85.04%. The blast furnace operating rate of steel mills in Shanxi rose to 61.5%, up 8.5% from December 3.

According to agency statistics, there are many steel mills that plan to resume production since February this year, mainly steel mills in Tangshan and Shanxi, Hebei, with a total volume of 22,000 cubic meters. Wang Zhaohua, a steel analyst at Everbright Securities, also pointed out that from March this year, the operating rate of the national steel industry will improve for the first time in nearly half a year, and the extent of this improvement will likely be the highest level in the past three years.

In addition to the lack of supply and demand, Chen Wei said that the country's imperative to reduce production capacity may also be one of the reasons for the surge in steel prices. The State Council previously released the "Opinions on the Iron and Steel Industry to Resolve Excess Capacity and Achieve Poverty Alleviation and Development", saying that starting from 2016, China will use five years to reduce excess crude steel production capacity by 100 million to 150 million tons. Local governments have set production capacity targets and vigorously promoted the upgrading and transformation of the steel industry.

At the just-concluded National Two Sessions, Sun Jimu, deputy to the National People's Congress and chairman of Handan Zongheng Iron and Steel Group, said that if the production capacity is not removed, the problem of oversupply in the steel market is still serious, and the oversupply will also cause low-price competition, low-price exports, and losses in the entire industry. Chen Wei pointed out that the government's determination to reduce production capacity is great, and it is more necessary to increase supervision when steel prices rise, especially the need to make good use of environmental protection standards, laws and other means to prevent the rebound of production capacity.

According to Chen Wei's analysis, the reason for the sharp rise in steel prices is not unrelated to the upcoming Tangshan World Horticultural Expo. It is reported that the Tangshan World Garden Conference will be officially held on April 29, lasting nearly half a year. During the opening period of nearly half a year, Tangshan, Hebei Province, requires local steel mills to frequently carry out short-term production, and the production limit will reach 30% to 50%. "According to the precedent of rising prices during the 2014 APEC meeting and the 2015 Anti-Japanese War parade, there is indeed a possibility that the Tangshan World Garden will lead to higher steel prices." Chen Wei said.

The later trend is still mainly wait-and-see

The convening of the two sessions, especially Premier Li Keqiang's government work report in conjunction with the 13th Five-Year Plan, has boosted market confidence. Trillion-level investment in railways and highways, national fixed asset investment in January-February 2016 increased by 10.2% year-on-year, real estate development investment of 100 billion yuan, government tax and fee reductions and strengthening supply-side structural reform are all factors that are good for the economy, good for the market, conducive to promoting the revitalization of the steel market, and effectively expanding the demand for the domestic steel market.

However, Yuan Zhibin believes that "March is the traditional steel demand season, and the trend of steel price prices may remain for a while, but in the long run, the trend of steel prices is still not optimistic." He pointed out that the current low inventory in the market mainly refers to the tight resources on the sales side, but the factory is still in the stage of overcapacity. In addition, China's macroeconomy is currently in a period of deep adjustment, and downstream demand is not optimistic. Although the price increase has a certain stimulating effect on the domestic steel market, it may not be able to achieve the goal of reducing capacity. Due to the lack of demand support for the rise in steel prices, in the long run, it will inhibit downstream demand to a certain extent, and the later trend of the steel market still needs to be cautious.