Chinese steel prices will rise steadily in late March

As for the demand for the steel industry, most of the country has been relying mainly on temperature recovery since the recent week. In particular, temperatures in the south have generally been around 20 degrees, and the amount of steel downstream industries started to increase gradually. The previous series of major investment projects have also gradually entered the construction phase, and the demand for steel and other raw materials is being released in an orderly manner.

In addition, after the “National Five” rules of the real estate industry produced some follow-up panic in the market, and after a period of calm, together with the NDRC’s emphasis on introducing supplementary policies at the end of March, the market has already recognized the authenticity, as the author has An analysis article said that the second-hand housing transaction tax is levied at 20%, not only will not crack down on the housing market, but will stimulate the need for rapid purchase of new housing market, which will facilitate the development of commercial housing, for the steel market, is to stimulate the demand for construction steel The major benefits of the release, and this year's land transaction prices and quantity hit record highs, indicating that the real estate market is recovering; so looking at steel market fundamentals far better than negative.

In addition, during the “**” period, the National Development and Reform Commission revealed that the government will focus on the introduction of a combination of consumption and investment policies to expand domestic demand. With the promotion of expanding consumption, the per capita possession of steel products in China will further increase. This point will be mainly reflected in the construction of “social urbanization” in urbanization construction, and will improve the consumption level of residents so as to stimulate the release of just-in-time steel products.

However, in another aspect, China's steel industry has always been in a period of severe overcapacity. In addition, due to the strong demand of steel mills for late-stage demand, crude steel production continues to maintain a high level. The latest data show that the average daily average steel production in late February To reach 2.0342 million tons, will inevitably promote the continued recovery of steel stocks this week, the latest steel inventory data released this weekend is expected to increase for 12 consecutive weeks, steel market supply pressure continues to increase.

However, according to the law of previous years, the rebound of spring steel stocks generally lasted until mid-March, and then it will enter the de-stocking phase. From the time point of view, it is the next week; and this week, businesses generally reflect that the spot market transactions have begun to stabilize. As the weather improves further, terminal demand release may gradually accelerate. After entering the destocking phase of steel products, it is estimated that the rebound in steel prices will continue to increase.

From the perspective of cost, despite the long-term bearish price trend of iron ore in the mid-to-long term, in the near term, after continuous high-yield releases from steel mills, the amount of previously purchased raw materials is relatively small, and the stocks of steel raw materials are basically After consumption is completed, we expect that in the following period of time, domestic steel mills will gradually enter the raw material market to make up the inventory operation. The iron ore market will usher in a new round of release. If no accident occurs, the mine price may be short-term. Steady increase in the market appears.

Then, what will be the trend of China's steel prices in the second half of March? We will discuss the following aspects.

1. Stocks hit a record high supply pressure in the market As there was little demand for downstream terminals in the domestic steel market in February, and the holiday effect was obvious, the domestic steel stocks in February showed a continuous rise. The social inventories of the five major steel grades (rebar, wire, hot-rolled, cold-rolled, and medium-thick steel plates) in the major steel cities of the country have risen for the 12th consecutive week, and the inventory level has hit a historical high since the statistics. The significant increase in steel stocks, on the one hand, unexpected increase in output of steel mills, the average daily output of crude steel in February almost equal to 2 million tons, higher than the previous Spring Festival production, leading to destocking start relatively slow, steel supply and Buying will have a certain influence. In March, domestic steel products will face heavier de-stocking pressure, which will limit the rebound of steel prices to some extent.

2. Short-term and difficult-to-start demand still needs to wait for a relatively large range of cooling, rain, and snow weather in the country. After the Spring Festival this year, the stability is relatively low, and it is not suitable for timely start-up of outdoor projects, which will affect the release of steel demand to a certain extent. In another aspect, a series of major infrastructure projects that were established before the end of last year, including “new urbanization”, need to wait for the introduction of policy guidelines; nearly RMB 1 billion of urban rail transit construction, and 38 newly-established railway projects are about 420 billion yuan. Yuan's investment projects are still in the early preparation stage, mainly project **. It is also difficult to form actual demand for steel in the short term, and it is speculated that the demand for end-use steel may gradually be released around the middle or late March. The fundamentals of demand in the domestic steel market in March may begin to be released, but the process should be relatively slow.

3. Policy bad bears are waiting for the release of good news. After the Spring Festival, the policy level is almost dominated by bad news. The State Council Executive Meeting promulgates the “State of the Five”, and continues to emphasize that the strict control of the real estate industry, expansion of domestic taxation pilots, etc. will once again be restored. The real estate market has been thrown into the limelight. As the largest steel demander in the downstream of steel, housing control overweight will inevitably seriously affect the investment in commercial housing development in 2013. The latest news shows that the Ministry of Homeland requires all localities to submit their land transfer plans by the end of March, which greatly hit the building materials market.

Looking forward to the introduction of more favorable news, there will be room for control in the "national five" rules, new urbanization rules and other directions need to wait for specific policies to implement. Before this, we believe that the sentiment of the steel market may be relatively heavy.

4. Monetary Policy Shows "Controlling Inflation" The face of funds may be loosened tightly With the strengthening of economic recovery, real estate and infrastructure investment are picking up, local investment impulses are intensifying, signs of excessive liquidity in the market are beginning to show signs of easing, and inflationary pressures are beginning to appear. Gradually increase market worries. Analysts believe that in the short term, the central bank may continue to tighten the liquidity of funds; this may cause further financial pressure on the steel trade market in the future, while the slogan of investment in downstream industries will also increase. In the short term, the tight liquidity of the market will still have a certain impact. After the Spring Festival, the demand of the steel market has not yet started. Some dealers have waited for a period of time and have started to have a limited price cut due to financial pressure and risk avoidance requirements. The operation of the goods, however, the effect is still not obvious, if the improvement is not achieved in March, it does not rule out the occurrence of further price reductions by the business.

5. The cost market temporarily weakens the demand for steel deposit reserve banks. Although steel mills did not appear to purchase warehouses after the Spring Festival, the steel mills will face new subsidies in March after undergoing heavy consumption during the Spring Festival. Library demand; The current weakness in the raw materials market, the possibility of improvement is greater; therefore, in March with the gradual release of demand for steel, the cost of raw material market support will also rise again.

In summary, the downstream demand of the steel structure market is difficult to centralize, and it may show a smooth process. The state's series of measures for steady growth are still in preparation for the preliminary period. Plus the current excessive steel supply pressure, the raw material costs support the short-term Weak, the confidence of some merchants in the spot market has gradually declined under the blow of various parties, and the foreign economic environment is still full of changes. Therefore, in March, the domestic steel market entered a period of gradual de-inventory, and the overall steel price may show an early shock and weaken, and the steel prices may recover steadily later.