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Market review: steel price fluctuated and fell in June

1、 Market Review

In June 2021, domestic steel prices fluctuated downward. As of June 25, the steel index closed at 5090, down 180% from the end of last month.

Looking back in June, the domestic steel price entered the shock mode, and fell after the price rose. Specifically, in the first ten days, boosted by the release of demand and capital market speculation, domestic construction steel prices ushered in a restorative rise; In the middle of the month, the price rose to the highest point in the month, and then the demand side quickly weakened. At the same time, the crude steel output reached a new high, the inflection point of domestic building materials inventory officially appeared, and the spot price quickly recovered; In the latter half of the year, with the withdrawal of speculative funds, black commodity futures adjusted, coupled with the shortage of funds in the near half year, the market price further fell.

2、 Supply analysis

1. Analysis of domestic steel inventory

According to the monitoring inventory data, as of June 25, the total inventory of major domestic steel products was 14.6871 million tons, up 31.1 tons or 2.2% from the end of May, and 233600 tons or 1.6% from the same period last year. The inventory of screw thread, wire rod, hot rolling, cold rolling and medium plate was 7.8023 million tons, 1.6414 million tons, 2.7634 million tons, 1.2064 million tons and 1.2736 million tons respectively. In addition to the decline of wire rod inventory and the slight change of cold rolling inventory, the inventory of the five major domestic steel products increased to varying degrees, among which the increase of rebar and hot coil was more obvious.

According to data analysis, in June, domestic terminal demand was sluggish, and the trading volume around the country dropped significantly compared with that in May. At the same time, the implementation of production restriction is less than expected, and the supply pressure increases instead of decreasing. Under the influence of strong supply and weak demand, since the middle of this month, the domestic steel market has re entered the accumulation cycle. After entering July, it is difficult to enlarge the terminal demand for the time being, and there are many uncertain factors on the supply side, so the output will fluctuate. According to the historical situation, it is expected that the inventory will increase.

2. Analysis of domestic steel supply

According to the statistics of China Iron and Steel Industry Association, in mid June 2021, the key statistics show that the iron and steel enterprises produced 23.9538 million tons of crude steel, 20.6611 million tons of pig iron and 22.8476 million tons of steel. The average daily output of crude steel in this ten day period is 2.3954 million tons, with a month on month growth of 2.57% and a year-on-year growth of 15.99%; 2.0661 million tons of pig iron, with a month on month growth of 2.16% and a year-on-year growth of 12.60%; 2.2848 million tons of steel, an increase of 3.80% month on month and 18.05% year on year.

3. Analysis of domestic steel import and export status

According to the data of the General Administration of customs, the growth rate of China's steel export slowed down in May. Specifically, in May 2021, China exported 5.27 million tons of steel, a year-on-year increase of 19.8% and a month on month decrease of 33.9%. From January to may, the total export of steel products was 30.92 million tons, up 23.7% year on year. In May, China imported 1.21 million tons of steel, a year-on-year decrease of 5.8% and a month on month increase of 2.7%. From January to may, 6.1 million tons of steel were imported, up 11.6% year on year.

In May, China imported 89.79 million tons of iron ore and concentrate, up 3.2% year on year; From January to may, China imported 471.765 million tons of iron ore and concentrate, up 6.0% year on year.

In May, China imported 21.04 million tons of coal and lignite, a year-on-year decrease of 4.6%; From January to may, China imported 111.166 million tons of coal and lignite, a year-on-year decrease of 25.2%.

4. Steel supply forecast for next month

In June, the production enthusiasm of domestic steel plants was high, and the average daily output of crude steel of key enterprises rose again; In the latter ten days, with the steel price callback, the situation of active production restriction of steel mills increased, and the supply pressure decreased. In July, under the background of carbon peak and carbon neutralization, the steel industry will continue to carry out the work of capacity control and production reduction. It is expected that the phenomenon of production reduction and maintenance of steel plants will increase, so as to ease the pressure of market supply. We expect that the supply pressure of domestic building materials may ease in July.

3、 Demand situation

1. Analysis of steel sales trend

In June, domestic terminal demand fell as a whole. Specifically, in the first half of the month, the backlog of demand was released, and the overall transaction performance was fair; In the second half of the month, with the advent of high temperature and rainy weather, and the tight capital of end users, the transaction performance was light. After entering July, it is expected that the weak demand situation is difficult to change temporarily. Once the overall sales continue to decline, it will drag down the price trend of building materials.

4、 Cost analysis

1. Cost analysis of raw materials

In June, the price of raw materials fluctuated at a high level, mainly rising. According to the monitoring data, as of June 25, the factory price of ordinary carbon billet in Tangshan area was 4840 yuan / ton, 160 yuan / ton lower than that at the end of last month; The scrap price in Jiangsu was 3640 yuan / ton, up 150 yuan / ton from the end of last month; The price of secondary coke in Shanxi was 2560 yuan / ton, which was 120 yuan / ton lower than that at the end of last month; The price of 65-66 grade dry base iron concentrate in Tangshan area was 1 540 yuan / ton, up 110 yuan / ton from the end of last month; Proctor's 62% iron ore index was US $214.9/t, up US $16.15/t from the end of last month.

Relative to the spot shock callback, this month's raw material price trend is strong, and the cost center of gravity moves up, which has a strong support for the finished product price.

2. Steel cost forecast for next month

The shape of the top of iron ore appears, and the later shock callback is a high probability event; The price of coke is easy to rise but difficult to fall due to the supply side's tightening expectation; Scrap demand is affected by EAF steel, and the price may be adjusted. Overall, it is expected that the domestic steel cost will decline slightly in July, but the space will not be too large.

5、 Macro information

1. Speeding up the construction of major projects in many places in China

Towards the end of the second quarter, the pace of major project construction in many places is accelerating. From the perspective of public information disclosure, high-tech manufacturing and other industrial investment has become the focus of investment. In addition to industrial investment, infrastructure investment is still the main direction of local investment. Recently, the 14th five year plan construction drawings of comprehensive transportation development in Chengdu Chongqing metropolitan area, Shanghai, Hainan, Zhejiang and other places have been released one after another. Several trillion yuan projects will be launched. The construction of railway and rail transit will not be reduced, and the investment in airport and other sea and air hubs will also be increased.

2. National Development and Reform Commission promotes supply and price stability of bulk commodities

Recently, the price department of the national development and Reform Commission and the price supervision and Competition Bureau of the General Administration of market supervision have sent a number of joint working groups to relevant provinces and cities to investigate the issue of ensuring supply and stabilizing prices of bulk commodities. At the same time of supervision, the relevant reserve materials are also ready to be put on the market. Through a series of "cooling" measures, overheated commodity prices also began to show varying degrees of decline.

3. Local version of the road map to peak carbon

Under the goal of "reaching the peak of carbon by 2030 and achieving carbon neutralization by 2060", the local version of the road map of reaching the peak of carbon is accelerating to surface. Zhejiang Province recently issued the "Zhejiang Province carbon peak and carbon neutral science and technology innovation action plan", put forward specific technology roadmap and action plan, grab the commanding point of carbon peak and carbon neutral technology, and support Zhejiang Province to achieve carbon peak and carbon neutral successively with high quality by 2025 and 2030《 According to the reporter of economic information daily, more than ten provinces and cities, including Shanghai, Beijing, Tianjin, Hebei and Shanxi, have proposed to introduce relevant plans for the action of carbon emission peak within this year. According to the design ideas of carbon peaking scheme that have been disclosed in various places, increasing the "double control" of energy consumption is still the most important work.

6、 International market

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According to the statistical data, in June, the international rebar prices were mixed.

In May 2021, the crude steel output of 64 countries included in the world iron and Steel Association statistics was 174.4 million tons, an increase of 16.5% year on year. Among them: China's crude steel output was 99.5 million tons, an increase of 6.6% year on year; India's output was 9.2 million tons, up 46.9% year on year; Japan's output was 8.4 million tons, up 42.2% year on year; The output of the United States was 7.2 million tons, up 47.6% year on year; Russia's estimated output is 6.6 million tons, up 14% year on year; South Korea's estimated output is 6 million tons, up 10.5% year on year; Germany's estimated output is 3.5 million tons, up 35.5% year on year; Turkey's output was 3.2 million tons, up 42.4% year on year; Brazil's output was 3.2 million tons, up 40.1% year on year; Iran's estimated output is 2.6 million tons, up 7.7% year on year.

7、 Comprehensive point of view

This month, the domestic steel market entered the traditional off-season demand. On the demand side, with the centralized construction of construction sites coming to an end and the influence of high temperature and rainy weather, the overall demand of steel terminal weakened. In the supply side, the effect of limiting production did not appear. The domestic crude steel output remained high, the supply side did not shrink, and the supply and demand fluctuated. Since the middle of June, the turning point of domestic steel inventory appeared. At the same time, the policy side repeated voice, the relevant ministries and commissions to strengthen control, crack down on speculation in the steel market, resulting in black futures high down, but also on the spot market has a negative impact.

In June, domestic steel prices showed a downward trend, which was basically consistent with the trend of our forecast report last month. In retrospect, since the domestic steel price peaked in mid May, there have been two waves of downward adjustments, namely, the "touch low" in late May and the "touch high" in mid June. The price fluctuation range has narrowed and the cost support has become stronger. After entering July, there are still variables in the market.

On the one hand, plum blossoms will appear in the middle and lower reaches of the Yangtze River, but the construction will be affected by the high temperature and hot weather, so it is difficult for the demand side to make large-scale production for the time being, and the shortage of funds will be alleviated; On the other hand, the production costs remain high, the profits of steel plants are suppressed, the enthusiasm for production will decline, and the pressure on the supply side may slow down in the later stage.

Therefore, in the two-way weakening trend of supply and demand, domestic steel prices will remain volatile. It is worth noting that the international factors in the later stage are quite variable, and there is a risk that the prices of iron ore and other bulk commodities will fall. Once the prices of raw materials fall, the focus of cost support will move down. On the whole, after the shock correction in June, the fluctuation of spot price will be determined by the strength of demand and the trend of raw material price. We judge the domestic steel price trend in July 2021 as: supply and demand become weak, and the price is under pressure.