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Inventory slowdown, steel prices show weakness


Increased supply suppresses steel prices

With the accelerated release of terminal demand, steel spot stocks continue to rise, and the spot profit calculation of rebar has always been maintained at more than 1,000 yuan/ton. In terms of actual profits, steel mills with better profits can still maintain profits of 800 yuan/ton and above. With high profits, steel mills are extremely willing to produce. Although there have been disturbances during the recent environmental restrictions on production, the ratio of crude steel to molten iron continues to rise to a high of 1.22, which also indicates that steel mills are still increasing crude steel output in the context of stricter environmental protection. As of now, the daily average crude steel has continued to rise year-on-month, and the output in mid-April reached a historical peak of 2.4367 million tons/day. Increased supply suppressed steel prices.

Inventory slowdown, steel prices show weakness

Decrease in steel destocking speed

Rebar is still in the process of accelerating destocking, but the off-season in demand is approaching, and the rate of decline is slowing down. MYSTEEL announced that the rebar factory warehouse + 35 city community warehouse was 9,161,200 tons, a decrease of 2.12 PCT month-on-month; the total hot-rolled inventory was 3,252,200 tons, which is much slower than rebar. In addition, in the second half of the year, the hot-rolled supply end will be put into production or higher than that of rebar, and the supply pressure is still not to be underestimated. In the later stage, according to the current rate of destocking, it is still difficult to reach the normal level of 2016 and 2017 in the past one or two weeks. With high profits, the supply of steel has increased relatively, and the inventory side may gradually stabilize and rise in mid-to-late May, and the pressure will reappear.

Limited charge support

In terms of coke, the inventory is still in the "three highs" pattern, and the supply pressure remains unabated. On the inventory side, due to the favorable early terminal demand, the coke inventory of steel mills has fallen, but it is still at a high level. The digestion speed needs to be verified. As downstream purchases have not picked up significantly, the decline in coke inventories is still not obvious. Port inventory has reached historical extremes, and traders are still under heavy selling pressure. Some coke companies may transfer their own factory inventory to the port. The actual inventory of coke companies is greater than the current inventory. On the supply side, the spot coking coal in the early stage continued to move downward, making room for coking profits. Although the profit of coking is on the verge of profit and loss for a long time, every time it approaches a loss, the profit is repaired, and the start of the work is still high.

In terms of iron ore, the downside of costs has narrowed, but the supply has increased in the second quarter. According to estimates, the output in the first quarter fell from the previous quarter, lagging behind the full-year production target. With the end of the weather disturbance factor, the four major mines may accelerate the production progress, and it is expected that there will be an increase of about 30 million tons in the second quarter. From the perspective of seasonal shipments, Australia and Brazil are also at historical highs. Due to the increase in early-stage demand, the available stocks of steel mills have moved up to a safe range.

Suspicious terminal demand

From the perspective of terminal demand, the early purchase of Shanghai snails reached a year-on-year high of 44,231 tons. The national steel transactions announced by MYSTEEL also hit a record high, with an average weekly transaction reaching 2,37679 tons, which has recently begun to fall. From the time point of view, there is a relatively obvious lag in the start of demand this year. On the one hand, the Spring Festival is late this year. On the other hand, migrant workers have increased their salary and working environment requirements, and their enthusiasm for returning to work is weaker than in previous years.

Demand was concentrated in April, and the data showed a new high year-on-year. Calculated based on the demand in previous years, early May was the time when demand fell. This year, due to the lagging demand, it may be delayed, but the rush to construction period may also weaken the probability of delay. On the whole, May and June will usher in the traditional rainy season. There is a higher probability that steel demand will fall from the middle to late May. The current Shanghai wire spiral procurement and the weekly average transaction of MYSTEEL steel have fallen to 22,455 tons and 192,268 tons, respectively. Signs of a callback are beginning to appear.

On the whole, with high profits, the increase in steel supply is relatively certain, but we still need to pay attention to the disturbance of environmental protection and production restrictions. The decline of steel inventories slowed down, and may weaken from mid to late May. The current rebar market is showing signs of weakness, and it may start to oscillate in the later stage, and short-selling on rallies will be the main focus.

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