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SunSirs: How Market Delay effect Steel Industry

February 07 2020 16:49:09     Sunsirs (Molly)

Impact of delayed market start on key products:

Iron ore: January ’s hurricane overlaid with fires, and Vale ’s shipments were less than expected, resulting in the market ’s expectation of its supply shrinking in February. However, after the hurricanes in previous years, Australia will increase shipments in the next few weeks to fill the gap; in addition, the Australian fire has little effect on ore shipment ports, mainly in the north. Although Brazilian ore shipments fell short of expectations, most of the reduction in Brazilian shipments was offset by reduced overseas demand. Therefore, the domestic epidemic will not have a significant impact on overseas supplies. On the other hand, from the demand side, despite the relatively high level of imported ore stocks in steel mills before the Spring Festival (average stock of imported ore is 32 days, total stock of imported sintered powder is 1992.01 million tons), but affected by public events, the terminal after the holiday The delay in the return of demand has been delayed, and some long-flow steel mills have adjusted their production plans accordingly to reduce demand for iron ore, which has dragged down prices.

Thread: The impact of this public event on wire snails is mainly in terms of downstream demand. Many provinces and cities have issued notices of delaying resumption of work by enterprises. The downstream construction manufacturing industry has postponed construction, and demand will be released later. On the supply side, the current closed roads in various provinces and cities and the obstruction of long-distance transportation will lead to a longer time for the accumulation of wire snails, which will form a period of negative interest for the market in the short term. On the 3rd, the price of the Hangzhou thread market as a whole fell from the pre-holiday period. Taken as a whole, the overall mentality of the market is weak and panic is spreading. It is expected that short-term thread prices will decline weakly.

Hot roll Coil: Affected by this public event, the Spring Festival holiday was extended throughout the country, and local enterprises clearly delayed the resumption of work. In some areas, the construction industry returned later than other industries, and manufacturing companies will also be delayed. It can be foreseen that the post-holiday consumption of steel products will be postponed, and the postponement of consumption will further increase the total inventory highs of profiles and hot coils. Coupled with the "closed city" in almost all provinces in Hubei, high-speed control in Liaoning, Shaanxi, Zhejiang and other places, steel transportation will inevitably be greatly affected, and steel inventory pressure will accumulate to steel mills. In order to ease the pressure on their own inventory, steel mills are expected to reduce prices in the near future. Some steel mills or limited production will stop production. It is expected that the prices of profiles and hot coils will first fall and then rise.

Medium plate: During the Spring Festival, some areas of domestic iron and steel warehousing and logistics can be put into the warehouse in the early stage. After the public events gradually fermented, the warehouse out of the warehouse was significantly affected. In terms of logistics and transportation, it is gradually tightening. In addition, some regional logistics and other transportation needs to be gradually declared. In some warehouses, due to the large number of foreign employees, the time for resumption of work is obviously delayed. It is expected that domestic plate prices may remain depressed and prices will decline.

In terms of waste paper and corrugated base paper: waste paper is a key raw material supply for the entire paper industry chain. More than half of the finished paper in China's paper industry uses waste paper as a raw material. However, due to the large number of acquisitions, there is a large number of personnel-intensive cross risks. In the current environment, in addition to some carton and color box factories that provide packaging for companies required for public event prevention and control, most companies, especially cardboard factories, have postponed the receipt time of waste paper and corrugated board. , Or will cause a shortage of raw materials for waste paper.

Packaging paper: China's packaging industry's products mainly include paper packaging, plastic packaging, metal packaging, glass packaging, packaging machinery. Among them, paper packaging is the most important component of the packaging industry, and is widely used in food, medicine, household appliances, cultural supplies and other fields. At present, logistics and transportation in many places in China are limited, and express delivery and other services have not been fully launched after the holiday. It is expected that when the subsequent situation subsides and logistics and express delivery services return to normal, increased demand for express delivery may drive the packaging paper market prices.


To sum up, SunSirs’ analyst Hangsheng He believes that the overall impact of the epidemic is more likely to be caused by panic expectations, and the demand for its impact is only delayed rather than disappeared. So once the incident is over, production can resume and production will accelerate. Then the market demand will have a small peak in the short period of time from late February to early March, then the turning point of steel prices may appear in the middle of March.


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