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    Steel price material reproduces staged rising market

    2019-02-11 04:24:08

    China Securities Journal Zhang Lijing

    Historical data shows that steel prices often show a period of rising prices during the period after the Spring Festival. Analysts pointed out that from the current steel market inventory situation and supply and demand situation, the steel market after the Spring Festival this year has a high probability of repeating the long market.

    High output and low inventory

    “The core factor affecting the trend of steel prices after winter storage is the degree of matching between winter reserves and post-holiday demand.”CITIC Securities(Hong Kong stocks 06030) Analysts 敖翀 analysis, winter storage is the embodiment of staged supply and demand mismatch, behind the game between traders and steel mills. The core factor of the winter storage is that the Spring Festival has led to a drop in demand. The average steel consumption in February is 61% of steel production. During the winter storage period, a large amount of inventory was concentrated in the total of 6 weeks before and after the Spring Festival, accounting for an average of 84% of the total accumulated warehouse. From the main participants, the winter storage is a process in which steel mills transfer risks to traders. The performance is that the proportion of steel mills in the winter storage is significantly reduced. Second, the cumulative accumulation time of the factory is 4 weeks less than the social inventory.

    “The characteristics of this winter storage phase are high output and low inventory. It is expected that the current winter storage stock center is expected to fall to the high point between 2016 and 2017. After the Spring Festival, the overall demand is expected to maintain resilience. Steel prices are expected to be biased. Strong operation," he said.

    “The post-holiday inventory will be slightly lower than the same period of 2018. It is expected that the inventory will decline by 3.2% in the first week after the Spring Festival, and the inventory will increase by 8.64 million tons. The scale of the winter storage is not small.”Shen Wanhongyuan(Hong Kong stocks 00218) Securities and steel industry analyst Yao Yang analysis, first of all, before the Spring Festival, due to the resumption of many blast furnaces in the early repair, and the new overhaul blast furnaces, so the long process steel mill output increased steadily. The production cuts were mainly from short-run steel mills, mainly due to the suspension of production during the Spring Festival holiday and the loss of production. The average weekly output for the two weeks during the Spring Festival is expected to be 9.5 million tons. Secondly, since December 2018, the procurement of building materials terminals exceeded expectations, up 8.5% year-on-year, which is related to the high-turning strategy of real estate and the rush to work before the holiday. It is estimated that the average terminal purchase volume for the two weeks during the Spring Festival this year is 5.82 million tons, which is equivalent to the past two years.

    A high probability of "opening the door"

    After the Spring Festival, the steel price has a good chance to usher in a “open door”. "Historical data shows that in the first 10 years since 2009, the steel price in the first week after the Spring Festival has risen to different degrees before the holiday. The price increase and length of time are uncertain, but there is no inevitable connection with the stock level in the first week after the holiday." Yao Yang said The strength of supply and demand affects the trend of steel prices.

    敖翀 , 通过 通过 通过 通过 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 Leading to low production, and real estate and infrastructure are in the upside investment cycle after the holiday, the demand is strong. After 2018 winter storage, steel prices fell by 15%, due to the high winter output during the winter storage period, the higher the winter storage sentiment, the large inventory accumulation, the lag behind the resumption of work after the holiday, a large number of stocks led to panic selling by traders.

    He said: "According to our model, the post-holiday inventory high is estimated at 2011 million tons, between 2016 and 2017. In the case of a rebound in infrastructure investment, demand resilience will continue into the first half of this year, expected March. The destocking rate will reach 435,000 tons/week, which is significantly faster than the same period in 2018, which is equivalent to the de-speeding rate in the same period of 2017. Steel prices are expected to be higher when the total inventory of winter storage is lower and the de-speed is faster. Continue to rise."

    Yao Yang believes that steel prices will rebound after the holiday, but face downward pressure after April. “Assume that the production season after the Spring Festival is over, and the weekly output will return to the peak of 10.1 million tons in April. Considering the strong toughness of new construction, it is expected that the total procurement level in March-June will increase by 1.2% compared with the same period of last year. The year-on-year growth rate will pick up in early April, when steel prices will face downward pressure."

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    Editor in charge: Fu Jianqing RF13564

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