Market weakness is hard to return

Last week, the domestic steel market prices continued to fall, and the declines increased. Except for a few areas in northern China with good turnover, some building materials varieties rose slightly. Almost all steel varieties in most parts of the country fell across the board. With the declining market demand, continued downward movement of raw materials, and financial pressure, the forward market and spot prices have hit new lows since 2013, and there are still no clear signs of a temporary stoppage. The market panic spread and pessimistic. Overshadowed by the increased willingness of traders to ship, the phenomenon of active price cuts has been increasing.

The steel price changes in Shanghai last week were as follows: Construction steel prices fell by RMB 100/ton in one week, and mainstream prices in the three-class screw market in Xicheng and Rizhao were at RMB 3330-3350/ton; the single-roll price of hot-rolled coil fell by RMB 90/ton in one week. , Rizhao, Shagang popular market price quoted in the hot roll 3450-3480 yuan / ton; cold rolled coil single week fell 80 yuan / ton, Wuhan Iron and Steel, Benxi cold roll market mainstream quoted at 4480-4500 yuan / ton .

The author believes that there are mainly the following factors that cause the market price to further accelerate decline:

First, the demand for steel products declined, and the market turnover was sluggish. Since the beginning of the year, the sluggish demand from the steel industry, such as real estate, automobiles and construction machinery, has been the main factor in determining the price drop. From the economic data released recently, it is difficult to restore the domestic economic conditions in the short term, which will directly affect the recovery of steel demand. According to HSBC's data released on the 23rd, in May 2013, the initial value of China's manufacturing PMI was 49.6, which was lower than that of 50.4 in April, and fell below the Qiong line, the lowest in 7 months. The data also showed that the initial value of China's manufacturing output index in May was 51.0, which was lower than that of April's 51.1, and the lowest in three months. Market analysts believe that “weak domestic demand and weak external demand” dragged down the initial value of the HSBC manufacturing PMI further in May, and increased the downside risk in the second quarter. As the weather changes, the temperature rises, and in the southern rainy season, the demand for steel will gradually be limited and the possibility of shrinking demand will increase. In order to fight for the limited market demand, merchants can only compete for price, in order to obtain goods.

Second, raw material prices fell further. As of the 24th, the ex-factory price of 66% iron concentrate wet basis in Tangshan was not included in the ex-factory price of 800-830 yuan/ton, which was a drop of 20 yuan/ton from the previous weekend; 63.5% of the printing capacity in Qingdao port was 915-925 yuan/wetton. , fell 15; Beilun port 63% Brazilian coarse powder 915-925 yuan / wet tons, down 20. The bearish sentiment of the parties remains the same, steel mills have reduced their inventories, the inquiry is still cold, and the transactions are weak. At the same time, as of the 24th, the ex-factory price of ordinary carbon billet in Tangshan fell to 3,060 yuan/ton, and the ex-factory price of 20MnSi billet was 3,180 yuan/ton, down by 20 yuan/ton from the previous weekend. The accelerated decline in raw materials, the cost of steel prices greatly weakened, in the absence of a clear improvement in downstream demand, the market sentiment is pessimistic, is expected to deteriorate.

Third, there is no substantial progress in the reduction of steel production. Since the beginning of this month, plans for overhaul of steel mills nationwide have increased. According to incomplete statistics, up to now, there are more than 40 steel mills that are or are planning to stop maintenance. However, according to the crude steel production data released by China Steel Association in the first half of May, the daily output of crude steel of key large and medium-sized enterprises in China was 1.748 million tons, up by 2.71% from the previous month, and the national estimate was 219.29 million tons, which was a 3.02% increase over the previous period. The daily production of crude steel in the same period of ten years has reached a record high in the same caliber. This shows that the reduction of production and production of steel plants has not been scaled up, and the rate is not enough. Under weak market conditions, the steel mills' production cuts are weak and far below expectations. The market is hopeful that steel prices will bottom out again in the short term. At the same time, the high daily output of crude steel will continue to exert tremendous pressure on the market.

Fourth, huge financial pressure. As the current round of steel prices fell for a long period of time, the period was large and the period was now seriously reversed. The entire industry was facing a loss. The capital chain of traders was tight and some of them had reached the edge of the break. Keeping low inventory has become the mainstream of market operations. The function of steel traders as a reservoir in the market has been lost. This not only reduces the activity of the market's resource flow, but also increases the traders' inventory and financial pressure. At the end of the month, in order to recoup the funds and organize orders for the next month, traders have to continue to cut prices.

On the whole, due to the lack of demand improvement in the short term, under the dual pressure of inventory and capital, coupled with the accelerated decline in raw material prices, the cost support line moved downwards, the market bears a strong atmosphere, and steel prices are facing further downward pressure.