SunSirs: Low Profits have Led to a Decline in the Enthusiasm for Wire Rod and Rebar Production

1. Price trend

According to the price monitoring of SunSirs, the prices of rebar and wire rod in Jiangsu, Zhejiang and Shanghai fluctuated narrowly last week. As of the 6th, the average price of HRB400 rebar in Jiangsu, Zhejiang and Shanghai was about 3080.33 RMB/ton, up 0.59% week-on-week; the average price of HPB300 high-strength wire was 3262.5 RMB/ton, up 0.08% week-on-week.

Market: Although there was post-holiday restocking last week, the downward trend of the raw material market affected the price of finished products, and the market situation deteriorated, and the transaction situation in the steel market gradually shrank. Although the demand for replenishment at the terminal is still being released, the demand is not sustainable. The transaction last week fluctuated, so the price of wire rod and rebar fluctuated weakly last week.

Inventory and output

Supply side　Last week, the output of building materials was 3.0519 million tons, a decrease of 1.9% month-on-month, and the output was reduced. In terms of rebar, the output of rebar continued to decline, down 70,500 tons from the previous month. In terms of provinces, Anhui, Jiangsu, Shaanxi and Shandong were the first to reduce production, and the main reason for the reduction was the maintenance of rolling mills and the transfer of molten iron in some steel mills. Guangdong's production increased last week due to the resumption of production of some steel mills; in terms of wire rod, the output of wire coils increased slightly last week, with a total increase of 11,500 tons. In terms of regions, the increase was mainly concentrated in East China, with an increase of 14,100 tons in supply. At the same time, the output in North China and Northeast China decreased slightly, with a decrease of 6,100 tons and 5,900 tons in supply, and the output in other regions fluctuated slightly; in terms of provinces, Jiangsu Province had a significant increase, with a weekly increase of 18,400 tons, and the output in other regions was mainly slightly fluctuating. At present, the profit of rebar is not advantageous, and the output of rebar still has room to decline in the short term.

In terms of inventory, the national building materials inventory was 4.4264 million tons last week, a weekly decrease of 1.71%. Taking rebar as an example, the factory inventory continued to decline, with a total decrease of 16,000 tons. Among them, the inventory in the southwest region decreased significantly, while the inventory in the North China region increased month-on-month; in terms of wire coils, the factory inventory decreased slightly last week, with a total decrease of 3,700 tons. In terms of regions, North China had the largest decrease, with a decrease of 14,500 tons, while East China increased by 12,300 tons. The inventory of steel mills in other regions fluctuated to varying degrees; in terms of provinces, Shanxi's inventory decrease was at the forefront, with a weekly decrease of 12,000 tons. In terms of social inventory, except for the Central China and South China regions, which accumulated 5,200 tons and 16,600 tons respectively last week, the rest of the regions showed a destocking state, among which the Northeast region had the largest destocking, with a weekly destocking of 42,700 tons. There is still room for short-term inventory to decline.

Demand side Last week, the national average weekly transaction volume was 106,130 tons, which increased week-on-week. The transaction situation recovered but to a small extent, and the transaction volume remained at 100,000 tons. Although the downstream terminal demand is still being released, it is showing a weak trend, mainly because the weather has entered the rainy season at this stage, and the release of terminal demand has weakened.

In summary, analysts from SunSirs believe that the weather is getting rainy at this stage, and although the terminal demand is being released in the off-season, it is showing signs of weakening; as for steel mills, production profits are damaged by the deterioration of spot transactions, and production enthusiasm has declined, but it has also made manufacturers more willing to support prices. The supply and demand of wire rod and rebar maintains a trend of both supply and demand reduction, and the destocking process continues. It is expected that prices will fall first and then stabilize this week, and will weaken in a narrow range.

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