After July, domestic steel prices continued to fall. According to the
monitoring data of Langer Iron and Steel Network, as of August 12 this year, the
comprehensive steel price index was 147 points, down 4.9% from July 2, and the
long-term steel price index was down 7.6%. In the same period, the closing
tonnage of main contracts for Shanghai threaded steel futures was 3677 yuan,
down 10%. Looking ahead to the market of steel products, it is bound to rebound
from the bottom after the fall. Generally, there will be no one-sided fall,
breaking the two-way wide oscillation pattern. Recent steel market volatility downward, the reasons are more obvious: First, higher profits stimulate iron and steel enterprises to actively
increase production. Taking threaded steel as an example, at the beginning of
July this year, the spot price of threaded steel in China exceeded 4000 yuan,
and the profit per ton of steel was hundreds of yuan, which stimulated the iron
and steel enterprises to increase production actively. According to the
monitoring data of Langer Iron and Steel Network, as of August 2 this year, the
blast furnace start-up rate of 100 small and medium-sized steel enterprises in
China was 81.3%, which was 8.6 percentage points higher than the previous low
point (March 29 this year). Combined with the increase of advanced production
capacity, the crude steel output in the first half of this year increased by
9.9%, close to the double-digit level, thus increasing the market. Field supply
pressure. Second, the speculative climate has risen and the social stock of steel has
increased. In the first half of this year, the national steel market continued
to rise, and the rule of "buy up or not buy down" increased market speculation.
Finally, some traders began to hoard supplies, which made the recent steel
social inventory level significantly increased. According to the monitoring data
of Langer Iron and Steel Network, as of August 9 this year, the national steel
social inventory was 11.587 million tons, an increase of 17.311 million tons
compared with the previous low (June 6, 2019), an increase of 17.6%. Social
stock level is an important indicator affecting the market. Although the
increase of social stock of more than 1 million tons of steel is not much
compared with the increase of crude steel of more than 440 million tons in the
same period, nearly 20% of the increase and the "inflection point" of turning to
rise still leave a shadow of the market and impact on market participants.
Psychological atmosphere. Thirdly, steel prices break through the "ups and downs" line, and market
participants'risk preferences change. The author believes that the large pattern
of the national steel market in 2019 is wide fluctuation, and there is a "median
line" between the fluctuation of prices. For example, this year's "median line"
of the main contract price of threaded steel is about 3700 yuan. This median
line can also be regarded as the "ups and downs line". When the price level is
higher than this 3700 yuan line, there will inevitably be downward adjustment
pressure. The higher the price is, the greater the downward adjustment pressure
will be, and the stronger the downward trend will be. Conversely, when the price
is below the 3700 yuan line, there will inevitably be a demand for market
rebound. The lower the price is, the stronger the demand for rebound will be,
and the stronger the rebound will be. In the previous period, steel prices
across the country have risen sharply, with the closing ton price of the main
threaded steel contracts reaching a maximum of 4093 yuan. Under the sub-price,
the risk preference of most market participants has changed significantly, from
profit to bad. Influenced by its operation, the market of course has to adjust
downward.
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