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SunSirs: Expect steel price correction to be limited, uptrend still expected
May 26 2020 10:09:17SunSirs(Molly)

SunSirs steel analyst Hangsheng He believes that in May, driven by the sharp rise in iron ore prices, the domestic steel industry as a whole showed an upward trend, but subject to excessive raw material costs, terminal price purchases and other factors, during late May, The prices of finished products showed a short-term correction, which further dragged up the iron ore price. On the whole, in the case of continued high profits of steel mills, the willingness to reduce production and maintenance is not strong. It is expected that market supply pressure will continue to increase, and steel prices will short-term or under pressure to pull back; while the futures market is expected due to peak season demand, industry mentality or long Bullish, so the black market is still likely to continue to rise.

The following is a review of the weekend economic news.

International aspect:

【Russian government released news that 25 billion rubles were allocated to support the Russian automobile industry. 】 【The minutes of the April 30 monetary policy meeting announced by the European Central Bank show that at the monetary policy meeting to be held on June 4, the ECB Council will evaluate information including the latest macroeconomic forecast. 】 【Russian Central Bank Governor Nabiulina said at a press conference that the central bank does not rule out the possibility of Russia's GDP falling by more than 8% in the second quarter. 】 【The Bank of India held an emergency meeting and accidentally cut interest rates for the second time this year, lowering the buyback rate by 40 basis points to 4%, and the sellback rate by 40 basis points to 3.35%. 】 【The Bank of Japan held a temporary financial policy meeting to launch a new loan plan to provide financing to SMEs through financial institutions, with a total size of 30 trillion yen. 】 【The United States White House economic adviser Kevin Hassett said that the unemployment rate in May may reach 20%, and the unemployment rate in June is expected to be higher than that in May, but then “should start to decline”. He also added that Trump is considering "all possibilities for the next phase of the economic stimulus package." 】

Domestic aspects:

1. At the joint meeting of the National Committee of the Chinese People's Political Consultative Conference, some members talked about insisting on improving the market mechanism and promoting the market-based allocation of factors. After listening to his speech, the General Secretary of the State pointed out that the Third Plenary Session of the Eighteenth Central Committee of the Party is the final word: let the market play a decisive role in the allocation of resources, and at the same time better play the role of the government. After reform and practice, we realized that we must not only overcome the blindness of the market, nor return to the old path of planned economy. Efforts should be made to better integrate the role of the market and the government. This is a process that ends in perfection.

2. The deputy director of the National Development and Reform Commission said at the press conference of the National Development and Reform Office that the lack of specific targets for economic growth this time does not mean that economic growth is not important. It is necessary to see whether it is to protect people's livelihood, employment, or overcome poverty. It must be supported by economic growth, and reform and opening-up measures should be used to stabilize employment, protect people's livelihood, promote consumption, stimulate the market, and stabilize growth. Therefore, although the GDP growth target is not directly mentioned, the content of economic growth has been integrated into other economic and social development targets. In addition, it said that this year it will take multiple measures to promote the recovery of consumption, further promote the optimization and upgrading of automobile consumption and the circulation of second-hand cars, and implement the fiscal and taxation support policies for the purchase of new energy vehicles, so that residents can travel conveniently. At the same time, it is necessary to comply with the trend of resident consumption upgrading, strengthen the brand, quality, standard and quality construction and supervision of commodities, and continuously improve the resident consumption environment and increase consumption levels; during the year, there will be a number of major foreign-invested projects successively landing, involving electronic information, new Materials, advanced manufacturing and other fields. This year will continue to significantly reduce the negative list of foreign investment access.

3. The Secretary-General of the National Development and Reform Commission stated that as of the end of 2019, the Chinese government ’s debt ratio was 38.5%, far below the level of major developed and emerging market countries. In general, it is possible, safe, and necessary to raise the deficit rate appropriately and issue anti-epidemic special government bonds. This series of fiscal policies will not only help stabilize the operation of the Chinese economy, but also help To stabilize the operation of the entire world economy.

4. The Deputy Secretary-General of the National Development and Reform Commission said at the press conference of the State Development and Reform Office that this year it will study and formulate implementation opinions on deepening the mixed reform of state-owned enterprises, create an upgraded version of the mixed reform policy, and better guide state-owned enterprises to promote mixed ownership reform; focus on optimization The development environment of the private economy must first implement specific measures to support the development of private enterprises in some fields such as transportation infrastructure and manufacturing. In addition, we will promote the liberalization of competitive businesses in some fields such as power, telecommunications, railways, and oil and gas. Clean up discriminatory regulations and practices linked to the nature of the enterprise.

5. The China Insurance Regulatory Commission has formulated a work plan to support the construction of the Guangdong-Hong Kong-Macao Greater Bay Area in 2020, including support for Guangdong-Hong Kong-Macao insurance institutions to cooperate in the development of innovative cross-border motor vehicle insurance and cross-border medical insurance products. The Bay Area set up operating agencies to support the development of Guangdong, Hong Kong and Macao's characteristic financial industry, studied the establishment of an insurance service center in the Greater Bay Area, and strengthened financial supervision cooperation between the three places.

6. The six departments such as the National Development and Reform Commission jointly issued the "Implementation Opinions on Creating a Better Development Environment to Support the Healthy Development of Private Energy-Saving and Environmental Protection Enterprises", proposing 12 policy measures to support the healthy development of private energy-saving and environmental protection enterprises.

7. Foreign Minister Wang Yi stated that China and the EU will strive to complete the negotiation of the China-EU Investment Agreement within this year and expand mutually beneficial cooperation in new fields such as interconnection, ecological protection, digital economy, and artificial intelligence.

8. The research group of the People's Bank of China Research Bureau pointed out in "China Finance" that with the lagging effect of the transmission of the real economy's difficulties to the financial sector gradually emerging, as well as the impact of some policy factors, the bank's late non-performing loan disposal and capital consumption pressure increased significantly Large, the growth rate of bank profits may decline, does not rule out the possibility of zero growth or negative growth during the year. It is necessary for banks to make good plans to deal with the possible rebound in non-performing loans and better support the development of the real economy.

9. The General Office of the Tianjin Municipal People's Government has issued "Several Measures for Promoting Automobile Consumption in Tianjin". By adjusting the policy of restricting the purchase and travel restrictions of small cars, it will better unlock the potential of auto consumption. The measure will be implemented from June 1, 2020.

The following is a review of the steel market over the weekend.

【Iron Ore】As of the morning of the 25th, the price of 61.5% PB fine ore in Rizhao Port and Qingdao Port is 728-729 yuan / wet ton, the price of 63% mixed ore in Brazil is 797 yuan / wet ton, and the price of 62% in India is 682 yuan / T. The price of 61.5% PB fines in Jiangyin Port is 748 yuan / wet ton, the price of 63% mixed ore in Brazil is 826 yuan / wet ton, and the price of 62% in India is 698 yuan / wet ton. The price of 61.5% PB fines in Tianjin Port is 735 yuan / wet ton, the price of 63% mixed ore in Brazil is 800 yuan / wet ton, and the price of 62% in India is 678 yuan / wet ton. As of May 22, 45 ports in the country imported iron ore stocks of 109,260,800 tons, a decrease of 1,688,200 tons from the previous week, hitting a two-year low.

【Steel billet market】Tangshan Pu's billet price was reduced by 20 yuan / ton on the 23rd, unchanged on the 24th, and rose by 10 yuan / ton on the 25th. As of now, the local part of Changli and Tangshan is 3260 yuan / ton. The Qian'an part of the factory is 3250 yuan / ton with tax, and the trader's bare price is 3060 yuan / ton.

【Finished material market】 The price of the building materials market fell by about 50 yuan / ton last weekend, and the plate market price was relatively stable. Market transactions were relatively deserted. However, the overall inventory level continues to decline, which is positive for steel prices. Data show that on the 25th, the construction steel inventory was 7.823 million tons. The week-on-month decline was 6.18%, and the hot coil stock was 2.397 million tons, and the week-on-week decline was 5.54%. The cold-rolled inventory was 1.089 million tons, and the week-on-month decline was 2.85%, both of which have continued to decline for 4 consecutive weeks. The stock of heavy plate is 520,300 tons, a decrease of 3.21% week-on-week. The overall inventory level was 11.8156 million tons, a weekly decrease of 5.63% and a continuous decrease of 4 weeks.

【Futures Market】 As of the night of the 22nd, I2009 rallied back and closed at 722 yuan / dry ton, down 0.14%; RB2010 was weak and oscillated low, closing at 3513 yuan / ton, down 0.96%; HC2010 weakly consolidating, closing at 3417 yuan / ton Fell 0.99%. While J2009 continued to rise, closing 1854.5 yuan / ton, up 1.48%; JM2009 also rose, closing 1161 yuan / ton, up 0.78%. In the overall black futures market, raw materials are stronger than finished products, and steel mill profits are expected to be under pressure, but finished product support is strong and the callback interval is limited.

To sum up, Hangsheng He believes that policies were frequently introduced during the two sessions, and the overall benefit is to stimulate the economic level in the second half of the year. Although the impact of the global public health event continues to ferment, the overall trend has improved, and major steel companies have stopped production, but they are gradually recovering. The global economy is expected to recover in the second half of the year. As for the domestic steel market, the new infrastructure continues to work hard to drive the digital upgrade of the industry; the policy of economic benefit for the people and the enterprise is gradually implemented to ease the pressure on the market; the spot market is recovering and the industry's destocking effect is showing; Overall expectations improved.

Therefore, it is expected that the steel price correction will be limited this week, and the gains can be expected. From June to July, the overall steel industry price level may return to the beginning of the year.

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