Post-holiday steel market trend analysis and forecast

In the past 2011, it was a difficult year for the steel industry. From the early days of bland to the late fall, the profits of steel mills have hit new lows and traders have suffered serious losses. Some people joked that in 2011, "the steel mills drank soup, traders drink the northwesterly wind", and thus the plight of the steel industry is evident. However, as the Spring Festival of the Year of the Dragon fades away, those bleak days will eventually become the past. In the face of a brand new page, we still have hope. In the new year, will the steel market continue its previous downturn or will there be hope for a bright future? This will be briefly explained below.

The global economic slowdown is expected to remain unchanged. During the Spring Festival, the European debt crisis continued to ferment. After the festival, Standard & Poor's lowered the credit ratings of France, Italy and other nine countries, and the European Financial Stability Fund (EFSF), on January 27, the International One of the major rating agencies, Fitch, also announced the reduction of the credit ratings of five euro-zone countries. Among them, Italy, Spain, and Slovenia were downgraded by two levels, and Belgium and Cyprus were downgraded by one level. In addition, Fitch also announced the rating of the above countries as "negative", implying that the ratings of these countries will still be further reduced by more than 50% in the next two years. The downgrade of the rating warns that the ongoing debt crisis in the euro zone will further jeopardize the financing capabilities of these countries. On the U.S. side, the Senate voted on January 26th by the U.S. President Obama’s request to raise the federal government’s public debt ceiling by 1.2 trillion U.S. dollars. This shows that the U.S. federal government will continue to enjoy food and drink. However, after the past year’s turn of the European debt crisis and the US debt crisis, the market has become commonplace for such news. The response was relatively flat. The overall performance of foreign financial markets during the long holidays is more eye-catching, as shown in Table 1. Affected by the EU’s embargo on oil imports from Iran since July and the private investors’ agreement on resolving the Greek debt crisis, international crude oil, base metals, and gold prices have risen more noticeably. The US dollar index has appeared. The falling trend favors the steel market.

In October, November and December 2011, the newly added foreign exchange decreased by 24.9 billion yuan, 27.9 billion yuan and 100.3 billion yuan respectively, which was negative growth for three consecutive months, and lowered the deposit reserve ratio channel. Since December 5, 2011, the Central Bank lowered the deposit reserve ratio of deposit-taking financial institutions by 0.5%; in addition, in the first three weeks of January, the Central Bank released a net total of 477 billion yuan in liquidity through the open market, which is higher than The scale of the funds released by the one-time deposit reserve ratio was lowered, and the financial strain on the interbank repo market was eased. The Shibor on January 19 was significantly lower than that on the 18th. The overnight rate, the 7-day rate, the 14-day rate, and the 1-month rate dropped by 166.92, 188.83, 220.16, and 165.14 basis points respectively. However, the funds for reverse repurchasing need to be returned to the central bank in early February. At that time, the liquidity pressure will increase again, which will increase the possibility of lowering the reserve ratio.

Supply pressure has slightly eased and demand is still weak. According to statistics from the Bureau of Statistics, average daily crude steel production in December 2011 was 1.6826 million tons, which was a rebound of 1.2%, but it was still the second lowest point of the year. According to my steel network survey, the steel mills' maintenance has increased in January. The average reduction rate of blast furnaces in the major steel mills nationwide was 22.2%, which was 1.6% higher than the previous month. As a result of the overhaul, the output of rebars was 1.043 million tons, hot-rolled 1.29 million tons, medium-thick plate 490,000 tons, and cold-rolled 495,000 tons. Under the drive of large-scale maintenance of steel plants in the near future, market supply pressure will be slightly reduced.

From the demand point of view, due to the early Spring Festival this year, after the holiday season, temperatures in most parts of the country are still low, which is still not conducive to the construction industry. According to data released by the National Bureau of Statistics, in December 2011, in 70 large and medium-sized cities across the country, the range of house prices fell or remained flat compared to the previous period. The regulation of real estate was not relaxed, and construction steel would also be suppressed. In addition, in 2011, the domestic automobile production and sales only completed 18,419,900 and 18,505,100 units, down 31.60 and 29.92 percentage points year-on-year, respectively, and the growth rate of production and sales was the lowest in 13 years. The decline in automobile production and sales reflects the downturn in downstream demand. The home appliance industry will also be affected by the end of the home appliances to the countryside policy. In addition, the traditional demand peak season has not yet arrived, and the improvement of downstream demand still needs time.

However, from the trader’s mentality, the willingness to pull up after the holiday season is relatively strong, and the “opener” meets the expectations of most businesses. The author takes the Shanghai Market Hot Rolling 3.0 as an example to count the price situation for eight years since 2004. It can be seen that except for the slight drop in the week after the Spring Festival in 2009, most of the prices after the Spring Festival have been rising. Other steels The species is similarly similar.

The overall trend of the market price trend of the chart over the years is that, no matter the macroeconomic situation at home and abroad, the supply and demand of steel products, the market mentality and the market's own operating rules, at present, the space for the steel market to continue to fall has been limited, and the upward chance is greater than the downward trend. The risk is that in the short term, the steel market is expected to embark on a wave of upward volatility. However, we still cannot ignore the fact that after a long holiday, due to the almost cessation of demand during the Spring Festival, and the steel mills continue to produce, the increase in market inventories will inevitably increase the pressure on market supply, thus restraining the upward price space. The sharp increase in steel prices still needs to be really improved in the terminal demand in the later period.