Inventories reduce steel prices into phased rebound

First, the supply of crude steel remains high, the future may be reduced. According to the latest statistics from the China Iron and Steel Association, the daily output of crude steel of key enterprises in the middle of June was 1.7455 million tons, an increase of 14,000 tons, and a month-on-month increase of 0.79%. It was lower than the 1.748 million tons that was created in early May of this year and was at the next highest level; the country’s estimated output of crude steel was 2.264 million tons, an increase of 0.8 million tons, which was an increase of 0.37 month-on-month. According to calculations, the crude steel production of non-key enterprises in mid-June was valued at 419,000 tons, which was a drop of 0.6 million tons from the previous month, accounting for 19.4% of the total, down 0.3% from the previous month.

According to the calculation of the profit and loss of production, the profitability of steel mills has improved this week due to the decline in ore prices. The loss per ton of steel is around RMB 200/t. According to the survey, the blast furnace operating rate in the Tangshan area has remained at around 91%. It can be seen that the financial constraints have led to an increase in the price of steel at the bottom. This situation is not necessarily a bad thing for the long-term development of the steel industry. In particular, the recent financial constraints in the market may have accelerated the pace of industrial transformation. The chain fracture will cause some steel mills to withdraw from the market in advance.

2. Inventories have continued to decline. The fundamentals have improved since mid-February. Steel stocks (3474, -7.00, -0.20%) have experienced a 14-week slide in social stocks. As of last week, total inventory has dropped to 17 million tons. Inventory fell to 7.6 million tons, a week-on-month decline of 1.95% and 2.72%. At the same time, the inventories of Tangshan Steel Billet continued to decline, falling from the high of 1.97 million tons to the recent 880,000 tons, a drop of 56%. Therefore, only from the inventory data, if the supply and demand situation does not change, the steel price will bottom out, and the rebound height and time will be affected by the situation of supply reduction and declining demand.

Third, the capital surface tension, the impact of the steel industry intensified Since late June, due to commercial bank deposits Lanchu, the central bank intentionally tightened liquidity and other factors led to the rapid rise in domestic capital rates, the Shanghai dollar discount rate Once soared to 9.67%, capital shortages not only have an impact on the steel trade industry, this effect has slowly begun to expand to the end demand market for steel mills and steel products. It is understood that many banks will continue to shrink their business in the second half of the year, and some steel mills also feel the pressure from the bank's contraction due to the unfavorable return of funds. In Jiangxi, small steel mills stopped production due to the disruption of funds. In fact, the impact of tight funding on the steel industry is far more than these. The tightening of the capital chain in the real estate market may cause the industry to re-enter the contraction cycle. From the perspective of the real estate industry, the subsequent impact of the “money shortage” has caused the development of the capital chain for developers. Large pressures and costs will increase accordingly, which will affect new housing starts and construction area data, which will in turn adversely affect steel prices. The real estate, machinery, and infrastructure of the downstream steel industry will also be affected to varying degrees.