Sunsirs: Cold rolled market prices may fall after the Spring Festival and then rise

1. Supply and demand are balanced in January, prices are firm and steady

Since 2020, the domestic cold-rolled sheet market price has basically remained high and stable. On the one hand, market resources are out of stock to support the quotation; on the other hand, it is affected by logistics restrictions. During the Spring Festival, the replenishment market has been extended and demand is relatively stable . Of course, in the week before the Spring Festival, there was also a "price without market" market, and the overall cold rolling market was basically closed.

According to the price data monitoring of SunSirs, as of January 31, the average market price of cold rolled coils in Shanghai 1.0 * 1250 was 4,535 yuan / ton, up 0.44% from the beginning of the month and up 8.69% year-on-year. Among them, Bengang Steel is 4,270 yuan / ton, Anshan Iron and Steel Group is 4,690-4700 yuan / ton, Maanshan Iron and Steel Group is 4,490-4510 yuan / ton, and Wuhan Iron and Steel Group is 4,450-4600 yuan / ton. WISCO has a large price difference. On the one hand, there is more shortage of mainstream specifications in the market than other steel mills; on the other hand, WISCO has more homogeneous competition. However, basically from the perspective of the market before the Spring Festival, Wuhan Iron and Steel has the fastest growth rate and the largest amplitude; while Benxi Iron and Steel and Maanshan Iron and Steel have relatively stable resources.

 From the comparison chart of the prices of hot and cold rolled sheets, they have basically shown synchronous rise and fall since the beginning of November. However, the increase in cold rolling is relatively smaller than that in hot rolling. On the one hand, it is affected by the decline in futures prices. Market prices are currently making up; on the other hand, cold-rolled prices are currently relatively high and there is little room for upside.

Supply side: As of January 17, of 47 cold-rolled production lines nationwide, the number of production shutdowns increased to 9. The overall operating rate was 80.85%, which has fallen for the first time after 5 consecutive weeks of stability, setting a new low in 2020 and 2019 so far; capacity utilization rate is 78.46%; weekly output of steel mills is 792,200 tons. The overall display shows that the supply of the cold-rolled market continues to decline at the current time node, and the support price continues to rise. On the one hand, due to the decline in demand during the Spring Festival, steel mills cut production and prices were high; on the other hand, due to increased maintenance, steel mills stopped production and cut production.

Inventory side: As of January 17, the inventory of 29 cold-rolled steel mills nationwide was 315,300 tons, a week-on-month decrease of only 28,800 tons, and the overall inventory level was normally high. The inventory in 26 major cities was 1.044 million tons, which has been rising for 4 consecutive weeks. Therefore, due to the impact of the Spring Festival holiday, the overall cold rolling mill warehouse began to pile up, and the social warehouse also increased, which dragged down the price rise.

Demand side: According to the data released by the China Automobile Association, auto production and sales in 2019 decreased by 7.5% and 8.2% year-on-year, respectively, and the declines increased by 4.2% and 5.4% respectively compared with 2018. Although each month in 2019 showed negative growth and the decline was more obvious in the first half of the year, from the perspective of monthly production and sales, China's auto industry is gradually picking up. In addition, for the news of the subsidy of new energy vehicle subsidies: On January 11, Minister of Industry and Information Technology Miao Wei said in a speech about the subsidy policy of new energy vehicles, "I can tell you for sure that there will be no decline in July 2020" No doubt it will bring new growth expectations to the automotive industry in 2020 and new demand for the cold rolling market.　

In addition, due to the weak real estate market and other factors, the home appliance industry in 2019 is generally facing downward pressure on performance. Data show that in December China's refrigerator output was 6.902 million units, an increase of 21.9% year-on-year; from January to December, the cumulative output was 79.043 million units, an increase of 8.1% year-on-year. In December, China's air-conditioning output was 20.349 million units, a year-on-year increase of 10.9%; from January to December, the cumulative output was 21,866.2 million units, a year-on-year increase of 6.5%. China ’s output of washing machines in December was 7.265 million units, an increase of 9.7% year-on-year; cumulative output from January to December was 74.33 million units, an increase of 9.8% year-on-year. China ’s color TV output in December was 20.86 million units, a year-on-year increase of 0.7%; the cumulative output from January to December was 19,991,000 units, a year-on-year decrease of 2.9%. With the high level of home appliances, market demand may show a downturn.

Therefore, from the perspective of the pre-holiday fundamentals, the domestic cold-rolling market as a whole maintained a "tight balance of supply and demand", which effectively supported the price.

2. The delayed of the demand after the Spring Festival, the price may fall first and then rise

Supply side: As of the latest survey data, the cold-rolled capacity utilization rate was 78.46%, the average monthly increase was close to 4.5%, and the steel mill output increased, but the average capacity utilization rate in the first three years was still at a low level. . Good for prices.

The steel mills side: The steel mills reported that the varieties of steel have received good orders from January to February, so the production direction will start to shift after the holiday, which will cause the general material supply to the market to continue to be tight. Good for prices.

The auto OEMs side: Although the order volume of raw materials has indeed increased month-on-month in the past two months, the procurement costs have continued to rise, and the high market price is firm. Therefore, it is estimated that production preparation for the first quarter will be guaranteed first.

Traders side: in February, the proportion of contract orders of steel mills decreased significantly, and price subsidies also contracted. May cause the arrival of the spot market to reduce the volume, the strong willingness to support the market price. And not worried about inventory accumulation.

However, from the above understanding, there are general concerns about the effects of delayed start and resumption of work under the "Spring Festival epidemic." Most of them believe that even after the Lantern Festival, there is a plan to start, but the overall market recovery is still unpredictable. If the "epidemic situation" improves, then the market may recover at the end of February, and market transactions will gradually increase, and due to the impact of the previous shutdown, overtime will be added, and prices will continue to rise. Conversely, there will continue to be a downturn, and the overall market will continue to be "priceless but no market," but supply will continue to increase and prices will begin to fall.

In summary, SunSirs cold-rolled analysts believe that the resumption of the cold-rolled market after the Spring Festival is relatively uncertain, and that market demand may show signs of slowing down. Therefore, cold-rolled prices are expected to fall first and then rise. The rise node may be at the end of February. The average price is expected to be 4450-4550 yuan / ton.

If you have any questions, please feel free to contact SunSirs with support@sunsirs.com.