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SunSirs: Fundamentals of Supply and Demand Weaken & Profiles and Hot Coils May Fall First and Then Rise in July

July 01 2020 14:57:29     SunSirs (John)

Looking at the profile market in June, it showed a trend of rising first and then falling, and the overall price rose slightly.

In early June, due to the strong price increase of raw materials, the prices of finished products increased.

In the middle and late period, due to the weather and the off-season of the industry, the demand began to gradually weaken. In addition, the price increase in the early period made the profit of steel mills improve, stimulating the enthusiasm of steel mills, and the steel production increased slightly, resulting in lower prices of finished steel.

The prices of profiles and hot coils are expected to fall first and then rise in July

First look at the macro aspects: the current macroeconomic environment is not good, the United States has increased tariffs on Europe and the United Kingdom internationally, and Chinese companies have been included in the entity list. The global market risk has worsened; The domestic situation is better. From January to May, the investment in fixed assets of transportation increased by 0.9% year-on-year. Domestic monetary policies have paid more attention to the precise drip of funds into the real economy. Various fiscal policies such as tax reductions and accelerated debt issuance are being implemented. Thirty-four pilot projects for building a powerful transportation country were approved, and the fundamentals of pulling infrastructure and promoting consumption have remained unchanged for a long time.

Look at the supply side: According to relevant online data, last week (2020.06.22-28, the same below) 247 steel mills blast furnace iron production capacity utilization rate of 93.42%, the average operating rate of 71 home appliance arc furnace steel mills in the country was 74.44%, both hit new highs this year. However, the recent correction of steel prices may cause some electric furnace factories to actively reduce production, coupled with the Tangshan environmental protection production restriction policy last week, and the high temperature weather will be ushered in after the end of the rainy season in July. There will be a slight decrease in output month-on-month.

Demand side: Before the Dragon Boat Festival, the market as a whole did not appear to purchase ahead of time, indicating that the market is dominated by on-demand purchases, and there has been no significant change in demand. However, after the southern China has produced plum, the demand for steel may have improved, and the infrastructure projects in various regions are continuing. The medium-term demand is still worth looking forward to.

Inventory: as of June 28, 2020, the same caliber survey and statistics have been carried out on profile warehouses in Shanghai market. The inventory of i-angle channel steel is 69,500 tons, which is 1,900 tons higher than last week and 4,600 tons more than that of last month. The inventory of some steel mills in China was 6.2031 million tons, with an increase of 285,800 tons on a weekly basis; the social stock of steel was 14,327,100 tons, with an increase of 92,800 tons on a weekly basis; the total stock of steel was 20.53 million tons, with an increase of 379,000 tons on a weekly basis, which rose for the first time in 15 weeks. The process of steel de stocking was prolonged, and the pressure of steel price decline increased.

In summary, in the short term, due to environmental protection production restrictions and weather factors, the supply and demand fundamentals of profiles and hot coils have weakened. The price may be slightly lower in early July. However, merchants have expected this year's market, and the weakening of demand is also reasonable. The operation is mainly based on reducing warehouses to avoid risks, and it is more likely to wait and see prices. In the medium term, domestic steel demand may improve. With the routine maintenance of steel mills, steel prices may rebound slightly. It is expected that in July, the spot prices of profiles and hot coils will be low before and then high, but there is little room for ups and downs, and they will fluctuate in a narrow range.


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