This issue views.
Time: 2021-8-1-2021-8-31
Keywords: production restrictions to reduce the pool of raw materials rebates
This issue guide.
● Market review: prices rose sharply due to the positive boost from production restrictions.
●Supply analysis: Supply continues to contract, and inventory turns from rising to falling.
●Demand analysis: high temperature and rainy impact, demand performance is weak.
●Cost analysis: the raw materials partly fell, the cost support weakened.
Macro analysis: stable growth policy remains unchanged and the industry is developing benignly.
Comprehensive view: In July, boosted by the nationwide overhaul and production restriction news, domestic construction steel prices ushered in a rebound trend. During the period, macro-good news came out frequently, the full implementation of the downgrade; speculative sentiment heated up again, the futures market rose strongly; under the expectation of production curtailment, steel mills frequently pull up the ex-factory price. Steel prices rose in the off-season, up more than expected, mainly because of the policy of crude steel production reduction in many places one after another, some steel enterprises began to reduce production, supply pressure to ease after the capital market to push the wave. However, along with prices continue to rise, rigid demand performance overall weak, in the high temperature and rainy weather, the construction of engineering projects is hampered, the terminal turnover fell significantly compared to last month. Supply and demand tend to weaken in both directions, and our judgment last month is basically the same, but the supply contraction was infinitely magnified by the capital market, intensifying the tension in the spot market. Overall, throughout July, the rise was expected, and the role of financial capital was clearly demonstrated. After entering August, the pattern of two-way supply and demand contraction will change: on the supply side, due to the severe task of compressing production, some areas will continue to expand the scale of production restrictions, production is difficult to rebound; on the demand side, with the relief of extreme weather, the delayed demand is expected to recover. Therefore, we predict that in August the domestic construction steel supply and demand structure will be optimized, steel prices and inertia upward space. However, with the increase in production restrictions, the recent iron ore, scrap and other raw material prices have fallen to a certain extent, steel mills cost center of gravity is expected to move down, the expansion of profits after the power of production restrictions or weakened (electric furnace steel is not in the administrative production restrictions). In addition, some steel products export tax rebate policy adjustment will reduce the number of steel exports in China, the increase in real estate regulation, will affect the pace of downstream demand release. -It is expected that the price of high quality rebar in Shanghai in August (based on Xiben index) will be in the range of 5,500-5,800 yuan/ton.
Review: Steel prices rose sharply in July
I. Review of the market
In July 2021, domestic construction steel prices rose sharply, as of July 30, the Westbourne Steel Index closed at 5570, up 480 from the end of last month.
Review of July, although the traditional demand off-season, but the domestic construction steel market counter-trend higher, the reason, mainly because the policy side to maintain loose, the market is expected to be good. Specifically, in the first half of the year, in the release of production restrictions and market speculation boosted by the mood, the overall domestic construction steel prices higher; mid, steel mills frequently pushed up the ex-factory price, the market around the formation of linkage, price increases to further expand; late, in high temperatures around the rain and some areas under the influence of typhoon weather, project construction is blocked, the release of terminal demand is insufficient, the price increase has narrowed. Overall, because the supply side of the shrinkage is expected to continue to strengthen, the capital market has a significant boost to the spot price, which ultimately led to the domestic construction steel prices in July exceeded expectations up.
Domestic construction steel prices in July after a significant push up, August market up whether the trend continues? What changes will happen to industry fundamentals? With many questions, together with the August domestic construction steel market analysis report.
Ⅱ, the supply analysis
1, domestic construction steel inventory analysis of the current situation
As of July 30, the total inventory of major domestic steel varieties was 15,481,400 tons, up 794,000 tons or 5.4% from the end of June, and down 247,500 tons or 1.6% from the same period last year. Among them, the inventories of thread, wire rod, hot rolled, cold rolled and medium plate were 8,355,700 tons, 1,651,100 tons, 2,996,800 tons, 1,119,800 tons and 1,286,000 tons respectively. In addition to a slight decline in cold-rolled stocks, the inventories of the other five major domestic steel varieties rose to some extent, but not by much.
According to the data analysis, in July, the domestic steel market supply and demand double down. Demand side: affected by the off-season factors, terminal demand performance is sluggish, around the volume of transactions fell significantly compared to June, but the market speculative demand is relatively good. Supply side: After the policy of crude steel production suppression in some provinces and cities, the supply cut is expected to be strong. Considering that production restrictions will still be further amplified after entering August, while the demand performance is expected to improve, under which the inventory is expected to be digested.
2, domestic steel supply situation analysis
According to the latest data from the China Steel Association, in mid-July 2021, key statistical steel enterprises produced a total of 21,936,900 tons of crude steel, 19,089,000 tons of pig iron, 212,681,000 tons of steel. The average daily production in this decade, crude steel 2,193,700 tons, an increase of 2.62% ringgit and 2.59% year-on-year; pig iron 1,908,900 tons, an increase of 2.63% ringgit and a decrease of 0.01% year-on-year; steel 2,126,800 tons, an increase of 8.35% ringgit and 4.29% year-on-year.
3, domestic steel import and export status analysis
According to the General Administration of Customs data show that in June 2021, China exported 6.458 million tons of steel, an increase of 1.1870 million tons, or 22.52%; year-on-year growth of 74.5%; January-June China’s total exports of steel 37.382 million tons, an increase of 30.2%. June China’s imports of steel 1.252 million tons, down 33.4%; January-June China’s total imports of From January to June, China imported a total of 7.349 million tons of steel, up 0.1% year-on-year.
4, the expected supply of construction steel next month
In July, under the influence of the nationwide production reduction policy, many places have been issued to reduce the task, some regional supply pressure fell back significantly. However, with steel prices sharply higher, steel profits were repaired, the pace of supply slowdown around the inconsistent. Considering that after entering August, administrative production restrictions will further increase, but market-based production cuts will tend to weaken, we expect the domestic supply of building materials in August will not have a precipitous decline.
Ⅲ, the demand situation
1, Shanghai construction steel sales trend analysis
In July, domestic terminal demand fell back from the previous year. In the middle of the month, under the influence of high temperature weather, the release of terminal demand was weak; in the second half of the year, East China suffered from typhoon weather, some warehouses were closed, and market transactions were hampered. Overall, the off-season effect is very significant, the turnover fell significantly from the ring. However, after entering August, the demand side is expected to pick up slightly: on the one hand, the funding side is relatively easy, and the demand that lagged in the previous period is expected to be released; on the other hand, the high temperature weather eases, and the downstream consumption is expected to grow. Therefore, the market has certain expectations for the demand in August.
IV. Cost analysis
1, raw material cost analysis
In July, raw material prices fell in part. According to the data monitored by Xiben New Trunk Line, as of July 30, the ex-factory price of common carbon billet in Tangshan area was 5270 yuan/ton, up 360 yuan/ton compared with the price at the end of last month; the price of scrap in Jiangsu area was 3720 yuan/ton, up 80 yuan/ton compared with the end of last month; the price of secondary coke in Shanxi area was 2440 yuan/ton, down 120 yuan/ton compared with the price at the end of last month; the price of 65-66 taste of iron ore in Tangshan area was 1600 yuan/ton. Dry-based iron ore concentrate price in Tangshan area was RMB1,600/ton, up RMB50/ton compared with the end of last month; Platts 62% iron ore index was USD195/ton, down USD23.4/ton compared with the end of last month.
This month, the decline in imported ore is more obvious, steel mill profit margins have been repaired.
2, the cost of construction steel next month is expected
Comprehensive current supply and demand situation, we expect: iron ore will still fall later; coke supply is tight, the price slightly raised; scrap steel demand by production restrictions, power restrictions, prices or high retracement. Comprehensive view, the domestic construction steel cost is expected to be slightly lower in August.
V. Macro information
1, the central and local multi-strategy “14 five” industrial carbon reduction path is clear
In the context of carbon peak, carbon neutral, from the ministry to local is accelerating the industrial green low-carbon transformation. The reporter learned that the “14th Five-Year Plan” for industrial green development and the “14th Five-Year Plan” for the development of raw materials industry will be released soon, while the relevant departments will develop carbon implementation plans for non-ferrous metals, building materials, steel and other key industries, and clarify the industrial carbon reduction The implementation path will be clarified, and the development of strategic new industries and high-tech industries will be accelerated, and the proportion of clean energy consumption will be increased. Localities are also actively deployed to cultivate and grow green industries, accelerate the application of new-generation information technology in green manufacturing, and create a number of green parks and green factories, etc., in order to accelerate the green and low-carbon high-quality development of industry.
2, China raised some steel products export tariffs, the abolition of export tax rebates for high value-added products
The State Council Tariff Commission announced that, in order to promote the transformation and upgrading of the steel industry and high-quality development, the State Council Tariff Commission decided to appropriately increase the export tariffs of ferrochrome and high-purity pig iron from August 1, 2021, after adjusting the export tax rate of 40% and 20%, respectively. In addition, according to the announcement jointly issued by the Ministry of Finance and the State Administration of Taxation, since August 1, 2021, China will also cancel the export tax rebate on 23 kinds of steel products such as steel rails. This is the second adjustment of China’s steel tariffs since this year, the first adjustment of tariffs in May, retaining the export tax rebates covering 23 tax codes of major high value-added products, this time all canceled.
3, January-June national industrial enterprises above the size of the profit rose 66.9% year-on-year
From January to June, in 41 major industrial industries, 39 industries increased their total profits year-on-year, 1 industry turned a loss into a profit, and 1 industry remained flat. The main industry profits are as follows: non-ferrous metal smelting and rolling processing industry total profits increased by 2.73 times, oil and gas extraction industry increased by 2.49 times, ferrous metal smelting and rolling processing industry increased by 2.34 times, chemical raw materials and chemical products manufacturing industry increased by 1.77 times, coal mining and washing industry increased by 1.14 times, automobile manufacturing industry increased by 45.2%, computer, communications and Other electronic equipment manufacturing industry grew by 45.2%, electrical machinery and equipment manufacturing industry grew by 36.1%, general equipment manufacturing industry grew by 34.5%, special equipment manufacturing industry grew by 31.0%, non-metallic mineral products industry grew by 26.7%, electricity, heat production and supply industry grew by 9.5%.
Ⅵ, the international market
In June 2021, the global crude steel production of the 64 countries included in the World Steel Association statistics was 167.9 million tons, an increase of 11.6%.
Specifically, China’s crude steel production was 93.9 million tons, up 1.5% year-on-year; India’s crude steel production was 9.4 million tons, up 21.4% year-on-year; Japan’s crude steel production was 8.1 million tons, up 44.4% year-on-year; the U.S. crude steel production was 7.1 million tons, up 44.4% year-on-year; Russia’s estimated crude steel production was 6.4 million tons, up 11.4% year-on-year; South Korea’s crude steel production was 6 million tons, an increase of 17.35%; Germany crude steel production of 3.4 million tons, an increase of 38.2%; Turkey crude steel production of 3.4 million tons, an increase of 17.9%; Brazil crude steel production of 3.1 million tons, an increase of 45.2%; Iran crude steel estimated production of 2.5 million tons, an increase of 1.9%.
VII. Comprehensive view
In July, boosted by nationwide maintenance, production restrictions news, domestic construction steel prices ushered in a rebound trend. During the period, macro-good news frequently, the full implementation of the downgrade; speculative sentiment again, the futures market rose strongly; in the production curtailment is expected, steel mills frequently pull up the ex-factory price. Steel prices rose in the off-season, up more than expected, mainly because of the policy of crude steel production reduction in many places one after another, some steel enterprises began to reduce production, supply pressure to ease after the capital market to push the wave. However, along with prices continue to rise, rigid demand performance overall weak, in the high temperature and rainy weather, the construction of engineering projects is hampered, the terminal volume of transactions fell significantly compared to last month. Supply and demand tend to weaken in both directions, and our judgment last month is basically the same, but the supply contraction was infinitely magnified by the capital market, intensifying the tension in the spot market. Overall, throughout July, the rise was expected, and the role of financial capital was clearly demonstrated. After entering August, the pattern of two-way supply and demand contraction will change: on the supply side, due to the severe task of compressing production, some areas will continue to expand the scale of production restrictions, production is difficult to rebound; on the demand side, with the relief of extreme weather, the delayed demand is expected to recover. Therefore, we predict that in August the domestic construction steel supply and demand structure will be optimized, steel prices and inertia upward space. However, with the increase in production restrictions, the recent iron ore, scrap and other raw material prices have fallen to a certain extent, steel mills cost center of gravity is expected to move down, the expansion of profits after the power of production restrictions or weakened (electric furnace steel is not in the administrative production restrictions). In addition, some steel products export tax rebate policy adjustment will reduce the number of steel exports in China, the increase in real estate regulation, will affect the pace of downstream demand release.
It is expected that the price of high-quality rebar in Shanghai in August will be in the range of 5,500-5,800 yuan/ton.
Post time: Aug-01-2021