The hottest steel price fluctuates and shows an up

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Steel prices fluctuate in an upward pattern as a whole

after a four-year trend decline, domestic steel market prices have experienced ups and downs since 2016. Although prices often rise and fall sharply, they generally show a volatile upward pattern. Often unexpected, with futures and Tangshan billet price changes as the fuse, the domestic steel market price, which is located in dry and ventilated places, suddenly launched a wave of rapidly rising market, which surprised industrial customers. If the rapid rise of domestic steel market prices from March to April is highly compatible with downstream demand, then the price rise at the end of June does not seem to be closely related to traditional demand. Since late June, what is the driving force for the rise of steel prices, especially in the futures market? Wei Yingsong, an industry expert, believes that behind the sharp rise in prices is the conflict between Macro Thinking and industrial thinking

according to Wei Yingsong's analysis, the biggest black swan in the global market in 2016 was "brexit". Previously, the mainstream media sent the message that the probability of staying in Europe was greater, but the result on June 24 was an uproar. The international financial market is volatile, the pound has suffered a record sharp decline, and the RMB has also depreciated significantly. Under this background, the domestic commodity futures prices have risen sharply, and the rise in the price of steel black series is just one of them. More than 80% of iron ore imports are dependent. At the same time, imported ore is priced in US dollars. When the RMB depreciates rapidly against the US dollar, the rise in iron ore prices naturally meets expectations. Therefore, we see that futures iron ore prices take the lead in rising strongly. Driven by the upward movement of costs, futures rebar and hot rolled coil prices also follow up one after another

since 2016, the "long and short thinking" game in the ferrous metal industry has been obvious, and the futures market price has fluctuated. Because the domestic steel market price is relatively low in history, and China's economic support policy is very dependent on infrastructure and real estate. Therefore, steel products have become a good investment game arena, and futures rebar and iron ore contracts are extremely popular. In the past, steel futures participants were mostly industrial customers, and their operation methods included "subjective unilateral operation", "hedging", "future cash arbitrage", "cross period locking profit", "cross variety cross period arbitrage", and so on. Since 2016, with the deepening of "de capacity", the boom of downstream demand has increased, and the relatively low steel price, the steel industry has unlimited space to imagine, so private equity, funds and other multi-channel funds have flowed in, and the operation methods of steel futures have become richer

due to the intensified competition for funds, a variety of news in the market began to fly around. It coincided with 2016, and there were many news that could be hyped. For example, the production restriction of Tangshan International Horticultural Exposition, the decomposition of industry production reduction tasks under the background of capacity reduction, the G20 summit in Hangzhou, the southern flood, etc; Then to the information related to industrial operation, the change of new real estate construction area, the trend of infrastructure investment, and the change of steel production enterprise production rate, in plant inventory data and steel social inventory data released by Shanghai Steel Union weekly. As a result, the steel market is filled with all kinds of news and rumors every day, which makes people unable to agree. Small retail investors are drifting with the tide in futures operation, bearing all kinds of inexplicable money making and unexpected meat cutting

at present, there are two mainstream operation ideas in the market, namely macro and industrial. Industrial thinking focuses on the current situation of the industry and focuses more on fundamental research; The macro thinking focuses on the overall economic operation, taking into account the fundamental research. In terms of the current market, macro thinkers believe that under the trend of RMB devaluation, the domestic economic operation pressure will increase, and the monetary policy of the central bank will tend to be loose. At present, there are not many high-quality targets that can be invested in the market, the performance of the stock market is poor, and the risk of the bond market is not small. Commodities, especially steel commodities with relatively low prices, are indeed good investment targets. This kind of thinking is more inclined to multi head operation. In addition, from the perspective of current market fundamentals, the growth rate of productivity of steel production enterprises is relatively slow, and the weekly social and in plant inventory released by Shanghai Steel Union has continued to decline, so the "long" thinking has been strengthened

people with industrial thinking are vigilant. The serious overcapacity of China's steel industry has not been substantially solved. The rise in steel prices in 2016 has restarted blast furnaces with an annual capacity of more than 50million tons that had been discontinued at the end of 2015. The flexible and hidden production of electric furnaces and medium frequency furnaces with an annual capacity of about 130 million tons also makes the market elusive; In addition, once steel production enterprises can make profits, especially when the profit space is relatively rich, it is difficult to curb the release of output by relying on policy constraints alone. In addition, the downstream demand increment is heavily dependent on infrastructure, and its growth space is limited. In addition, as social inventory is more dispersed, the decline of inventory in mainstream cities cannot fully reflect the real situation of the market. Therefore, the market price should not rise rapidly, and the operation mode of industrial thinking has a natural "short" thinking. They do not understand steel structure and are unwilling to take the steel structure road; This has also become the biggest divergence between macro and industrial thinking

as for the market price of steel, Wei Yingsong believes that it is appropriate to think in a "long" way. After all, when there is no good substitute for capital investment, steel products are undoubtedly a good target, but we need to pay close attention to the performance of stock markets, bond markets and other investment products as well as the trend of profit-making funds. At the same time, some fundamental situations also need high attention, especially the profit changes of steel production enterprises will become arbitrage opportunities. It is not advisable to blindly optimistic about the current situation of the steel industry. The following points can be used for reference

first, the domestic downstream steel demand may not be as good as the market feeling. According to the author's model calculation, the domestic downstream steel consumption shrank by nearly 2% year-on-year in the first half of 2016; At present, all kinds of voices convey the feeling that the inventory continues to decline, especially last Friday, the total inventory of the five major varieties of Shanghai Steel Union has fallen to 8.62 million tons, hitting the lowest point of the year. The market generally believes that the downstream demand is relatively strong, and the fact may be different

second, the social inventory of steel is relatively scattered. When we subdivide the inventory data, we will find that the most obvious decline in the inventory of the five major domestic varieties recently is the utilization of new rebar materials in socks, which undoubtedly puts forward new technical requirements and difficulties for many production enterprises, while the inventory of plate varieties fluctuates very little; In the context of infrastructure projects blooming everywhere, the social inventory of rebar is bound to be more dispersed, so the decline in inventory in 35 mainstream cities is in line with expectations, but the decline in national inventory cannot be calculated simply according to the proportion weight; In addition, due to the recent rainstorm in the south, the transportation of steel has also been blocked, and part of the social inventory is still in the way of transportation. According to the survey of Shanghai Steel Union, about 200 ships from the steel mills dominated by Jiangsu region alone have been affected by the river closure, with a total volume of 160000 ~ 170000 tons

third, the production restriction in Tangshan and the rainstorm in the South have led to the shutdown of some enterprises, which not only affects the output, but also affects the demand. The intensity of production restriction in Tangshan will affect the output supply, but it cannot be calculated blindly according to the maximum impact intensity; Post disaster reconstruction will drive the demand for steel, but it can't be simply compared with the flood in 1998. The maximum torque, torsional strength, upper yield strength and lower yield strength of houses and infrastructure in 1998 are different from those at present, and the flood impact they can withstand is also different. After the flood, the steel price rises and falls, and there are not too many projects to be rebuilt, The construction of urban "sponge body" is a long-term plan and will not be achieved overnight

fourth, once steel production enterprises have high profits, they need to pay attention. After all, China's iron and steel overcapacity pattern has not been fundamentally improved, especially the invisible medium frequency furnace and electric furnace enterprises have a lot of flexibility in reaching production rates. High profits will inevitably promote production increase, thereby causing supply pressure. In addition, steel exports have a great influence on China's steel industry. According to Wei Yingsong's analysis, the export volume of steel in 2016 may hit another record high, among which the export volume of other alloy rods has increased significantly. It should be noted that the monthly year-on-year increase is 39%, and the export volume of plate is actually a negative growth, with a monthly year-on-year decrease of 2.8%. This is closely related to the relatively strong performance of the current rebar market, and it is estimated that the export volume of other alloy rods in the second half of the year will be difficult to maintain a high growth

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