SunSirs: Rebar, Wire Rod Prices to Extend Downtrend on Tepid July Demand

Price Trend

According to SunSirs price monitoring, in June, the price of rebar and wire rod rose first and then fell, and fluctuated in a narrow range. On the 29th, the average price of HRB400 rebar in Jiangsu, Zhejiang and Shanghai was 3061 RMB/ton, down 0.04% from the early trading; the average price of high-speed wire rod (HPB300) was 3252.5 RMB/ton, down 0.23% from the early trading.

Factors that affect price

Supply

As of June 26, rebar output showed a 56,600-ton weekly increase but a 76,700-ton monthly decline; the social inventory decreased by 53,500 tons to 3.634 million tons, a decrease of 311,900 tons from the previous month; the factory inventory increased by 32,800 tons to 1.856 million tons, a decrease of 8,600 tons from the previous month.

Last week, the output of building materials was 3.0393 million tons, an increase of 2.25% from the previous month, and the output continued to grow. In terms of rebar, the output of rebar increased by 56,600 tons. In terms of regions, the increase was at the forefront in Central and South China, Northwest China, and North China. In terms of provinces, Hubei and Xinjiang saw significant increases, mainly due to the resumption of production of rolling mills in some steel mills and the adjustment of production varieties, which led to an increase in rebar production; Anhui was affected by the short-term maintenance of rolling mills in some steel mills, and the output decreased slightly; in terms of wire rods, the output of wire coils increased slightly last week, with a total increase of 10,400 tons. From a regional perspective, the increase is mainly concentrated in North China, with an increase of 16,500 tons in supply, and the output in other regions has increased to varying degrees; from a provincial perspective, Shanxi Province has seen a significant increase, with weekly output increasing by 12,500 tons, while the output in other regions has mainly fluctuated slightly. Currently, affected by the adjustment of varieties, the output of building materials may continue to rise in the short term, but the profit of billets is still better than that of finished products, and the incremental space is also relatively limited.

Market

In June, the start-up of downstream construction sites was greatly affected by the weather, the overall steel demand was reduced, the fundamental data showed seasonal changes, the market sentiment weakened, and the operation was mainly based on quick turnover strategy. Merchants maintained a low inventory state and were not willing to ship at low prices.

Demand: Last week, the national average weekly transaction volume was 98,700 tons, a slight increase from the previous week, and the transaction situation deteriorated. The transaction volume remained above 90,000 tons. Although the downstream terminal demand was still being released, it showed a weak trend. The main reason was that the weather in June entered the rainy season, and the release of terminal demand weakened.

Market Forecast

In terms of demand, the market in July is still in the traditional off-season. Downstream production is limited, and downstream purchases have become less and more concentrated. Fortunately, the steel mills themselves have good profits and maintain the current production scale. Supply may increase; affected by the weather, the release of demand from downstream construction sites has slowed down, and inventory has maintained a downward trend. The market mentality is cautious, and merchants are willing to support prices, but the problem of real estate capital chain continues, and the release of demand in July is limited.

In summary, under the expectation of limited terminal production in July, the fundamentals of building materials have turned to increased supply and reduced demand, and the market speculation sentiment has weakened. Merchants are in a situation of supporting prices: rebar and wire rod may rise first and then fall in July, and likely to continue narrow-range fluctuations.

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