Five factors affect the late steel market

How the market for steel products after the Spring Festival is a hot topic that steel traders generally care about today has a direct impact on the formulation of their business strategies and sales models. According to feedback from operators and market research by industry insiders, the factors that influence the trend of the steel market in the later period are mainly reflected in the following five aspects:

First, the demand for the steel market after the Spring Festival is difficult to release quickly. After the Spring Festival, the weather is still cold, and according to convention, the construction industry with large steel demand will not be very booming. Many construction projects can usually resume construction after the fifteenth lunar month of the first month, so the demand for steel products is limited. However, by the middle or late March, local infrastructure construction projects will begin one after another. Manufacturers such as home appliances and automobiles will enter the season of both production and sales, which will drive demand for steel products. It can be foreseen that the demand for steel products will continue to shrink after a period of Spring Festival, and will gradually be released later. By the end of March to April, demand for downstream terminals will increase significantly.

Second, the supply of the steel market may increase after the Spring Festival. Before the Spring Festival, due to the sharp drop in steel market prices, some steel mills suffered losses. For example, many mid-frequency furnace steel mills have lost RMB 200/ton, and mills producing long steel such as rebar and wire rods have also lost more than RMB 200/ton. In this case, a batch of steel mills were repaired before and after the Spring Festival, and the output was significantly reduced. For example, many small electric steel mills have successively stopped production since the Spring Festival. Many mid-frequency furnace manufacturers have successively stopped production from February 10 and will not resume production until around March 5. At the same time, the operating rate of steel mills has dropped significantly. For example, the utilization rate of strip steel in the Tangshan area is about 55%, the profile operating rate has dropped to 35%, and the construction steel utilization rate has dropped to 24%. Many rolling mills in the north have already stopped production, and many manufacturers will stop production for 15 days to 20 days. However, after entering March, most of the steel mills have completed maintenance, ushering in the climax of the resumption of production, and the steel production will also increase. The resources to be put on the market will increase significantly, and the contradiction of oversupply will be further aggravated, thus curbing steel prices. Rebound.

Third, there are variables in the export. Since January 1 this year, although China has cancelled the export tax rebate policy for boron-containing steels, China’s steel exports continued to increase in January, reaching 10.29 million tons, a record high. However, whether the steel exports in February and March can continue to rise cannot be determined. The industry generally believes that the situation of late steel exports is not optimistic, and the possibility of continued growth in export volume is not likely to be lower, and it may decline, which will have a certain impact on the domestic steel market.

Fourth, the price of steel has bottomed out. Since the beginning of this year, domestic steel market prices have continued to fluctuate, and some steel prices have reached oversold levels. Statistics show that as of the end of January, the rebar price in the Shanghai market was 2,180 yuan/ton, which was 1,100 yuan/ton lower than 3,280 yuan/ton before the Spring Festival last year; the price of ordinary hot rolled coil was 2,550 yuan/ton, compared with last year. The price of 3,430 yuan/ton before the Spring Festival fell by 880 yuan/ton; the price of general-purpose cold rolled coil was 3,450 yuan/ton, which was 770 yuan/ton lower than the 4220 yuan/ton before the Spring Festival last year. The current steel market price has been at the lowest point in the past 10 years. In the bottom region, the space for further decline is very limited. Therefore, from the current price level, steel prices may usher in a wave of rising prices. Some operators believe that it cannot be ruled out that there is a possibility that stocks will be pulled up in the afternoon.

The fifth is the eagerness of steel traders. From the mentality level, the steel prices continued to fall sharply in the early period, leading traders to lack of confidence in the market outlook. However, after the market has been boosted by positive corrections such as consolidation shocks and RRR cuts, the pessimistic atmosphere has eased. Most traders still have some expectation for future steel price rises, showing a relatively optimistic attitude. Coupled with the current low prices of steel prices, businesses are eager to think up, a strong sense of price, which helps to promote the mid-to-late March steel prices ushered in the market rebound.

These five factors are favorable to the good side of the domestic steel market in the later period and are also favorable to the empty side. Therefore, it is expected that steel prices will continue to be dominated by consolidation in March, and by mid-March or April, there will be a wave of rally, and the duration and rebound will depend on changes in supply and demand conditions.