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SunSirs: The overall steel market presents a pattern of "strong raw materials, weak timber" (March)

April 01 2020 13:38:01     Sunsirs (Molly)

In March, the black market as a whole was in a weak downward trend. Among them, the raw material iron ore market is dominated by the overall wide fluctuation trend, and the price is relatively firm. However, the prices of construction steel, such as rebar, have rebounded only in the early part of the year, but have continued to decline since then. The prices of hot-rolled coils and other sheet materials have generally fallen weakly, and there has been basically no rise throughout the month.

As far as the steel market is concerned, the strength of raw material prices and the decline in the prices of finished products have put greater pressure on the profit of steel mills. Although there is still a profit rate of 87.78% (research data of 247 steel plants nationwide), the overall profit level is relatively low. According to data from the China Iron and Steel Association, in the January-February period, the sales revenue of member steel enterprises decreased by 6.04% year-on-year, the profits decreased by 35.8% year-on-year, and the sales profit margin decreased by 1.09% year-on-year. It can be seen that under the industry level in March, its profits will be reduced.

According to data from the SunSirs iron ore industry chain: iron ore prices have basically stabilized. Billet has increased slightly. Steel raw material prices have remained firm. The decline in plate prices was significantly larger than that of construction steel. Mainly due to the steady advancement of the country's infrastructure needs and the increase in quantity and weight, the market economy easing policy also took the lead in landing in real estate and other markets. Although the industrial manufacturing industry has also benefited, the overall performance was less than expected, and the small and medium-sized processing and manufacturing enterprises have generally suffered from financial pressure, demand pressure, and inventory pressure, making it difficult to quickly resume the normal state under the overweight and resumed work. Coupled with the continuous fermentation of global public health events, the export market has shrunk severely, and most orders have been cancelled or postponed, which has also affected the overall market demand environment.

Five bearish phenomena: continuous steel production, poor transportation capacity, inventory accumulation, sluggish transactions, and insufficient funds. This is a portrayal of the steel market in March. The slump in the spot price of steel has made it difficult for the futures market price to stand alone, and its decline has been worse than ever.

As of the close of the day on the 31st, the main coking coal contract rose 1.16% to 1260.5, the main coke contract fell 0.65% to 1763.5, the main iron ore contract was 0.85% to 650.5; the main hot rolled coil contract fell 0.74% to 3071, and the main rebar The contract fell 0.71% to 3233. Looking at the overall trend, raw material futures are still strong, and the decline in adult products is large, and the overall industrial chain is polarized.

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Variety 1, the iron ore market fluctuated widely, and the price level was centered.

In terms of price, according to Sunsirs price data, as of March 31, the average price of 62% PB powder ore port car plates in Australia was 652.89 yuan / wet ton, and the price of 63.5% coarse powder in Brazil was 696.88 yuan / wet ton, 62% printing powder. The price was 609.17 yuan / wet ton, up by 0.19%, 0.41%, and 2.55% from the beginning of March, respectively.

In terms of transactions:

[Port spot] The total turnover of iron ore in the main port nationwide totaled 1.653 million tons, an increase of 31.4% month-on-month; the average daily turnover last week was 1.179 million tons, and the average daily turnover last month was 876,000 tons.

[Forward Spot] The cumulative forward spot transaction was 455,000 tons, an increase of 82% month-on-month. The average daily transaction last week was 743,000 tons, and the average daily transaction last month was 504,000 tons.

In terms of futures: The main contract basically maintained a wide range of shocks in March, but the highest price broke through the February high and then declined. In addition, the daily fluctuation range of the K line in the month is large, at a range of 50 yuan / dry ton. The market expects that due to the contraction of steel mill profits in the future, maintenance will increase, or the demand for ore will weaken. However, the continuous decline in port inventory has also supported the spot price.

Taken together, the daily trend line of the K-line crosses frequently, and the KDJ moving average gold cross is difficult to break through, and continues to diverge, and there is no obvious cross-over trend; while the MACD three lines are close to the 0 line, and are mainly parallel in the short term. It is expected that in the short term It is difficult to have continuous ups and downs. The future market outlook is expected to continue to fluctuate.

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Variety 2, hot-rolled coil market transactions are blocked, and prices continue to fall.

In terms of prices, according to the price data of the business association, as of March 31, the average price of 5.5 * 1500 * C hot rolled coils in Shanghai Q235B was 3345 yuan / ton, a 5.71% drop from the beginning of March. In terms of regions, the prices in southern and central China generally fell by 20 yuan / ton, the prices in north and northeast regions fell by 10-20 yuan / ton, and the prices in eastern China fell by 10 yuan / ton. The prices in the southwest and northwest regions were temporarily stable.

In terms of futures: After the main contract is changed, the futures have fallen for two consecutive years, and there has been a sharp decline before, which has caused the futures price to continue to widen with the spot price, dragging down the spot price. In addition, its futures prices seem to be lower than the market opening after the Spring Festival in 2020, indicating that the market is pessimistic.

In terms of transactions: quotes from traders have generally fallen, and the originally sluggish transaction market was affected by rain and weather, and the trading atmosphere was even weaker. There are inquiries in the sporadic market, but there is almost no transaction. And telephone inquiries are less. At present, except for the large inventory of traders, the new supply of steel mills is also on the way, leading to the phenomenon of local stockpile. What's more, the supply has not been unloaded for 40 days, some resources have shown signs of rust, and the merchants suffered heavy losses. Coupled with the dual pressure of capital interest and shipping costs, most businesses have indicated that they may begin to clear their positions at low prices next month to ensure cash flow.

In summary, after the Japanese K-line crosses the 4 moving average, it continues to diverge, and the KDJ moving average continues to bottom, and the MACD third-line is also down. It is expected that the future market and spot will continue to fluctuate downward in the short term.

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Variety 3, the rebar market demand slows down, and prices rise first and then fall.

In terms of prices, according to SunSirs price data, as of March 31, the average Shanghai market price of 16mm three-level rebar was 3,419 yuan / ton, a 2.26% drop from the beginning of March. Among them, East China and South China markets generally fell 10 yuan / ton, North China fell 10-20 yuan / ton, and prices in central China remained flat.

In terms of transactions: 181,800 tons were traded on the 31st, an increase of 10,600 tons from the previous day. According to the understanding of the business community, the transaction of low-cost resources in the market is still acceptable, but the transaction of high-priced resources is still sluggish, and the supply prices of first-tier steel mills have gradually approached the second- and third-tier steel mills. From the end market, if not necessary and contract requirements, The materials, qualifications and quality are consistent. Most of the price-based purchases mainly lead to the decline of market resource prices.

In terms of futures: After the main contract is changed, the futures price has fallen sharply and has shown a 4-trend downward trend. The price is close to the opening price after the Spring Festival in 2020. Inverted V trend, expected downward.

In summary, after the Japanese K-line crosses the 4 moving average, it continues to diverge downward, and the KDJ moving average continues to bottom, and the MACD third-line is also down. It is expected that future short-term futures and spot will continue to fluctuate downward.

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In conclusion, SunSirs analyst Hangsheng He believes that the steel market in March was sluggish, and the overall pattern of "strong raw materials, weak materials". Although the current market inventory is still higher than the same period of previous years, it has been in a downward trend for 3 consecutive weeks, and the decline in the construction steel market is greater than that of sheet metal. In addition, with the country's continuous policy stimulus bonus (targeted reduction in inclusive finance for small and medium-sized enterprises, new infrastructure development efforts, and old infrastructure steadily accelerating implementation, etc.), market demand may gradually pick up. It is expected that the destocking of the market will accelerate in the later period, and steel prices may stop falling. Of course, it is worth noting that the shrinking of the export market is also the current short-term time effect. Therefore, the shift from international demand to the domestic demand market is also a major test. Therefore, the reduction of steel mills' output and the procurement of terminal demand are the keys to whether the steel market can improve in April.

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