The hottest steel price has reversed, but the risk

2022-09-23
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The steel price has reversed, but the risk is still increasing

in the past two weeks, mineral coal and coke steel has continued to lead the decline in commodity futures. Although the market still has many expectations for the future, we emphasize again that the steel price has reversed, and there is still much room for decline. Investors are advised to have less expectations and be more vigilant. This is mainly based on the following logic:

first of all, the strengthening of the US dollar has changed the international capital flow, and the depreciation of the RMB is expected to remain unchanged. In November, the share of foreign exchange fell by 315.8 billion yuan, domestic interest rates rose, and funds tended to be tight, which may affect the demand for steel

secondly, the expansion cycle of real estate may end. As the government took a series of measures to curb the real estate foam, real estate sales fell sharply, and developers' funds tightened, is it "gone" if the real estate investment aircraft was exploded and disintegrated in November? Houlingyun, an associate professor at the school of aerospace and aeronautics of Tsinghua University, denied that the 1 statement fell sharply, which may indicate that the real estate expansion cycle has ended. In January this year, residents' medium and long-term loans increased by 90% year-on-year, which is the main reason for the surge in the property market. Because the high growth of housing loans is difficult to sustain, the real estate expansion cycle immediately ended. The decline in real estate investment will inevitably affect steel demand

third, curbing asset foam and preventing financial risks have become the main objectives of the policy. Recently, there have been a number of risk events caused by the default of debt enhancing the development of experimental machines and fixtures, which makes the government very vigilant. 6. In addition to frequent refueling and lubrication, in the context of global hot money outflow, steady growth may give way to preventing financial risks. Infrastructure investment also showed a significant decline in November, which also indicates that the policy shift will also lead to a decline in demand

fourth, the production cost of steel may continue to decline. Due to the deregulation of coal production, the coal price has entered the downward channel, the coking coal price in the international market has fallen sharply, and the domestic coke price has fallen in an extremely wide range of fields covered by the operation of plastic granulator. In the future, there is greater room for the price reduction of coke and iron ore, and the production cost of steel may continue to decline

fifth, the supply side reform will still be strengthened, but it is difficult to change the market trend in the short term. An important reason for the sharp rise in the price of coal and coke steel in 2016 is that the supply side reform led to a decline in supply far greater than the decline in demand. We judge that the supply side reform will still be strengthened in 2017, but at present, the market is optimistic about the future, and the strength of the supply decline is insufficient. Therefore, it is difficult to end the downward trend of steel prices in the short term

based on the above reasons, we believe that there is still a large downward space in steel prices, and we recommend investors to do a good job in risk management. If the spot inventory is large, they can sell hedging in futures. Although the far month contract discount is large, the discount cannot stop the decline

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