In January 2020, the epidemic raged across the country. With the tide of rework after the Spring Festival, major provinces and cities made strict deployment of epidemic prevention and control measures. This is both a challenge and an opportunity for the steel market. The challenge is that various labor-intensive enterprises such as manufacturing and construction have delayed the start of work, resulting in a sharp decline in downstream demand and a long duration, and the risk of steel prices is facing a significant decline. The opportunity is that the market will face a new round of demand explosion. The rush period, placing orders, and replenishment of inventory will all lead to accelerated consumption of the spot market, which will cause the steel price to stop falling and rebound.
Steel Market Challenge 1: Black-based futures fell sharply at the opening, and the spot market outlook was not optimistic.
As of the close of February 3, the main thread contract fell to 3233 yuan / ton, a drop of 8.02%; the hot-roll main contract fell to 3246 yuan / ton, a drop of 8.02%; the main iron ore contract dropped to 606.5 yuan / ton, a drop of 7.97 %; The main coke contract plummeted to 1733 yuan / ton, a drop of 5.89%; the main coking coal contract plummeted to 1168.5 yuan / ton, a decrease of 4.02%; however, the main contract of the dual silicon futures continued to maintain a large rally, of which the main silicon iron futures The contract rose to 5942 yuan / ton, an increase of 1.78%; the main contract of manganese and silicon futures rose to 6538 yuan / ton, an increase of 1.97%, mainly due to the lack of inventory of double silicon plants, and the bidding price of Hegang in February rose 300 yuan / Ton, after the holiday demand for steel mills emerged, prices rose sharply.
Judging from the data of the exchange, futures prices have plummeted, which has weighed on spot prices. Although there have been no starts in many places and no spot quotes, the market price of Hangzhou threads is only 3400-3500 yuan / ton, Before the Spring Festival, prices plunged 260-320 yuan / ton. Tangshan's billet spot price was 3,000 yuan / ton, a big drop of 300 yuan / ton from the pre-holiday period. Therefore, after the steel market is expected to have spot quotations, the plunge cannot be avoided.
Steel Market Challenge 2: Delayed start of large-scale downstream terminals, which significantly hindered the return of demand.
The number of confirmed and suspected cases of new coronavirus infection nationwide has continued to increase recently. As of February 3, the cumulative number of confirmed cases across the country has exceeded 17,000. Although the momentum of new cases has slightly converged, prevention and control measures have become more and more strict.
In addition to the decrease in personnel mobility caused by prevention and control and publicity, provinces and cities have also postponed the planned resumption of work after the State Council extended the Spring Festival holiday.
From the data point of view, the basic resumption time is basically concentrated on February 10th, which is mainly based on the current estimates of epidemic prevention experts. The newly confirmed cases of this epidemic will reach a high point around the 15th day of the first month (February 8th). In view of the prevention and control of the SARS epidemic, it takes at least about 20 days from the time when the number of new cases has shrunk, the epidemic has been basically controlled, and the prevention and control measures are nearing their end. Therefore, the downstream terminal demand gradually starts at least from the end of February to the beginning of March. Considering that the panic in the market has dissipated and the degree of prevention and control in different regions is different, it is expected that the time for the terminal's full recovery will be around mid to late March, until it reaches normal levels.
Therefore, the contraction of demand caused by delayed construction will be one month after the Spring Festival, so the duration of the decline in steel prices may also be so long. Of course, the decline may gradually shrink, after all, steel mills will continue to follow up after the price cuts.
According to the "SARS incident in 2003", this time it also affected the market in stages. Therefore, after experiencing challenges, the steel market also has great opportunities.
Opportunities for the steel market: tough real estate demand, strong infrastructure support, and demand may welcome a small peak.
Although the epidemic is continuing, there are still a small number of companies still producing. According to the understanding of SunSirs, the automobile, home appliances, elevators, machinery, and shipbuilding industries have generally been producing a small amount, most of which resumed work on February 10, which is generally delayed by about 7-10 days compared with previous years. In addition, domestic leading shipbuilding companies only started construction after February 10, which was delayed by about 10-15 days compared with previous years. Some large-scale production companies have resumed their work until February 14th, and they have to decide on the time to resume work based on social control.
It is worth noting that most downstream manufacturing companies indicated that production expectations are relatively good before the Spring Festival and that raw material reserves are relatively sufficient. After resumption of work, stable production is guaranteed; of course, there are also some home appliance companies that operate without inventory (JIT) and are produced by suppliers. The recovery situation and logistics situation may have a greater impact; some companies have already delivered orders in February before the Spring Festival, so the delayed start has limited impact on it.
Taken as a whole, under the influence of the society, firstly, the delayed resumption of work will not lead to the continued limitation of the subsequent production enterprises. Secondly, the resumption time of the upstream and downstream of the steel industry chain is basically the same, which has limited impact on production progress. Third, the production rhythm arranged before the Spring Festival is disrupted, and there may be a large-scale rush period in the later stage, which will increase the capacity utilization rate and the operating rate to make up.
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