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SunSirs: Galvanized market stabilized in April, may rebound in May

March 26 2020 10:06:33     SunSirs (Molly)

Since February, the domestic price of galvanized steel has been falling all the way, and as of now, it is still in a downward trend. On the one hand, the speed of resumption and production of major steel mills is accelerating, market supply is increasing, and prices are dragged; on the other hand, terminal demand is not effectively released, and purchase transactions are sluggish; finally, the pressure on traders' funds is increased, stocks are cleared, and baskets are returned.

According to SunSirs price monitoring, as of March 25, the average market price of Shanghai's 1.0 * 1250 * C hot-dip galvanized coil was 4,346 yuan / ton, down 7.06% from the beginning of February, 4.40% from the beginning of March, and 8.74% from the same period last year. Among them, the resources of Benxi Iron and Steel and Handan Iron and Steel are 4240-4270 yuan / ton, Wuhan Iron and Steel 4480-4500 yuan / ton and Tangshan Iron and Steel 4180-4200 yuan / ton. On the whole, market prices have fallen by more than 300 yuan / ton in the past two months.

From the perspective of the galvanizing industry chain, the trend of the past two months, the overall galvanizing industry chain has maintained a downward trend, but the decline has gradually contracted. It is mainly because the added value of downstream products is relatively high. Under the environment of low demand in the entire steel industry, the transmission of the industry's price drop is covered by processing costs, so it is more resilient.

In terms of supply, as shown on March 20, out of 130 266 galvanized production lines across the country, only 59 were overhauled, which basically resumed work and resumed production on a large scale, but it was still more than normal. In addition, the operating rate of steel mills rebounded sharply to 77.82%, the utilization rate of production capacity rose to 61.43%, and the weekly output of steel mills increased to 739,900 tons, which are at normal low levels. It is expected that there will be room for improvement in the future. It also shows the steel mill's determination to produce, and the pressure of market supply is prominent.  

In terms of inventory, the data showed that as of March 20, the galvanized social inventory was 1.409 million tons, and it continued to rise for 10 weeks, setting a record high; the steel plant inventory was 755,700 tons, the next high. The recent continuous rise in inventory has not yet shown an inflection point, which also highlights the slow consumption rate of downstream galvanized resources. However, it is worth noting that the factory treasury has seen a slight decline, but the social treasury has continued to rise, only the growth rate has slowed. It is expected that under the current market economic background, the inventory pressure of steel mills may continue to be passed on to traders, and if it remains weak, the price of galvanizing may continue to fall.

 From the spot K-line chart, compared with the plunge in 2018, the current decline is still relatively small. In addition, its price has not yet reached its lowest point in 2019. Moreover, the delayed release of demand or the rebound will be even greater.

In summary, SunSirs galvanized analysts believe that the current fundamentals of the galvanized market are still “oversupply”, which is mainly reflected in three aspects: unabated supply, new high inventory, and sluggish transactions, which have led to price pressures. In addition, traders are still selling goods, but whether their steel mill orders in April will continue, most of them are still under consideration due to the impact of funds. However, it is understood from the steel mill that its order-benefit policy may be introduced in the near future, and the settlement profit will increase, with the intention of accelerating inventory consumption. Therefore, from the current form, the order in April or the later period is the key to price changes. It is expected that there should be partial or reduced orders and steel mills will reduce production in a timely manner to jointly guarantee market prices. Therefore, it is expected that it will still decline at the end of March, and it will stop falling in mid-April, and then the price will rise after the release of concentrated demand. The average market price is expected to be 4300-4400 yuan / ton.

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