After the Spring Festival holiday, due to unexpected public events, most domestic galvanized plants were postponed to start construction, which on the one hand led to a further decline in the operating rate, output decline, and inventory accumulation; on the other hand, the market transaction was deserted, and no market.
According to SunSirs price monitoring, as of February 7th, the average price of Shanghai's 1.0 * 1250 * C hot-dip galvanized coil market was 4676 yuan/ton. As most traders delayed construction and the steel market was closed, the overall price level was It will remain flat before the Spring Festival. However, it is understood from the market that sporadic quotes from manufacturers still exist. Among them, Shanghai Bengang Steel is 4,480 yuan/ton, Shanghai Shougang Steel is 4,620 yuan/ton, Hangzhou Tangshan Steel is 4,580 yuan/ton, and Hangzhou Bengang is 4,520 yuan/ton. On the whole, the market price is about 110 yuan/ton lower than before the Spring Festival. Because there is no market and high inventory, it is expected that after the industry resumes work, prices will continue to fall.
On the other hand, according to SunSirs research and understanding, although traders have resumed work, some businesses have opened online offices. However, because the market is closed and the willingness of downstream terminals to inquire is extremely weak, although sporadic small orders are closed, logistics is blocked. Delays in shipments also increase the pressure on merchants' inventory. According to a big trader in Shanghai, since the winter storage began to accumulate before the Spring Festival, resource consumption has basically stagnated, and the inventory has been full. It is planned to resume prices and clear some of the inventory to ease cash flow.
On the supply side: According to data, as of February 7, 225 of the 266 galvanized production lines nationwide were overhauled, an increase of 77 from the same period of the Spring Festival in 2019. The operating rate of steel mills dropped sharply to 15.41%, a decrease of 28.95% from the same period of the Spring Festival in 2019. Capacity utilization rate was 14.42%, a decrease of 44.06% from the same period of the Spring Festival in 2019. And the weekly output of steel mills was 173,500 tons, which was 530,000 tons lower than the same period of the Spring Festival in 2019. All four figures reached record lows. It shows that under the influence of current public events, steel mills continue to reduce production and market supply is shrinking. However, due to the near-term stagnation of downstream demand, galvanized prices have fallen sharply due to inventory accumulation.
In terms of inventory: As shown on February 7, the galvanized social inventory was 10.675 million tons, and it continued to rise for 5 weeks, setting a new high in 2020. The inventory of steel mills was 496,600 tons, although it was still slightly lower than the same period in 2019. 83,000 tons, but it is a new high in the past 8 months. The inventory data shows that since the Spring Festival of 2020, the stocks of galvanized steel plants and social stocks have maintained a pick-up trend, but the increase is not large, mainly due to the low supply side, which makes the overall level of galvanized steel plant stocks little bit higher than normal. Inventory pressure is mainly on the trade side.
Demand for downstream terminals: According to the resumption documents of various provinces and cities, the downstream terminal prices of real estate and manufacturing are all labor-intensive enterprises. Most of the resumption time is in March, and they need to be approved before they can resume work. However, some livelihood projects have also been approved for construction. However, due to the restrictions on logistics and the slow rework of workers, it is expected that the increase in demand will not be able to support prices.
To sum up, SunSirs galvanized analysts believe that the current fundamentals of the galvanized market are in the "oversupply" market, which is mainly reflected in the high inventory accumulation. This will lead the pressure on prices. And because traders have overloaded inventory; demand has not yet started; logistics is blocked; funding is tight, and other unfavorable factors, the market price is expected to continue to fall after the resumption of work. Then, after most of the terminal demand recovered, prices began to rebound. Therefore, it is expected that the price of galvanizing will continue to decline in the middle and late February. In early March, the overall steel market will recover, or there will be new price increases. The average market price is expected to be 4500-4600 yuan/ton.
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