Early last week, the government work report set a GDP growth target of about 5% in 2024, although the growth target is consistent with 2023, but considering last year’s high base, this year’s 5% growth target is more meaningful, and subsequent policies to support economic growth are still needed.
After the two sessions, the market trading logic turned to the fundamentals of supply and demand. Although the market pessimism spreads, the long and short game is intense before the demand is verified. From the current thread position point of view, the main 05 contract has reached a record high, which also shows that the market has a large divergence in expectations for the future market. We believe that there are still expectations for the bottom grinding and marginal rise of steel prices.
Mysteel survey data last week showed that the inventory inflection point of thread and hot coil (3767, -75.00, -1.95%) appeared:
As of last week, Mysteel small sample data shows that the cumulative range of the five major materials is basically unchanged from last year at about 2%. According to the balance sheet, if the small sample thread table needs to increase by 29% to 2.3 million tons this week (an increase of 32% in the same period last year), the total thread inventory will go to the warehouse, one week earlier than the previous judgment of the fifth week after the festival. According to Mysteel small sample data show that as of last week, the total inventory of hot rolls rose by 65,000 tons week on week, and the range of accumulation narrowed from the previous week. From the lunar data, the total inventory of hot rolls in some years has begun to go to the inventory last week, mainly due to the faster recovery of production last week, the total inventory of hot rolls is still in the inventory. We expect the inventory turning point to occur in the next two weeks.
For the rest of March, due to weak expectations, low profits and steel mills struggling to support prices, the steel supply side is expected to increase limited:
1. Due to Tangshan environmental protection production restrictions and temporary maintenance of steel mills in other areas, as of last week, the average daily molten iron production of Mysteel247 has declined for three consecutive weeks to 2,222,500 tons/day. Last week, Yunnan, Guizhou and other places sudden production cut announcement, and some steel mills due to high inventory in the plant and pessimistic season demand expectations and other factors delayed the resumption of production: it is expected that the production of hot metal this week still has about 10,000 tons of room for decline. This week, the production of molten iron will bottom out, and then slowly pick up, according to Mysteel preliminary estimates in March, the average weekly production of molten iron or 2.23 million tons/day, only an increase of 0.3 million tons/day compared with February.
2. The slow speed of steel mills to resume production inhibited the growth of lumber output: according to the balance sheet, the thread of the long process rose slowly in March, and the weekly average output was 2 million tons, far lower than the weekly average of 2.48 million tons in the same period of the lunar calendar last year; The hot coil production this week or reach the recent high of 3.22 million tons, but then there are steel mill maintenance, resulting in production may still decline (March hot coil weekly average output or 3.15 million tons, the same as the Spring Festival production).
Although the short process production growth rate of thread after the festival is the same as last year, but considering the current profit of Jiangsu Valley power has turned from profit to loss (as of last week Jiangsu Valley Power profit loss of 30 yuan/ton), the subsequent short process production growth rate will be significantly slowed down: it is expected that the short process thread production at the end of March is 380,000 tons, lower than the 460,000 tons in the same period last year.
At present, the accumulation of fundamental contradictions between supply and demand of finished materials is limited, and it is expected that under low production, the range of finished materials to be stored is still predictable. Low supply in March may support spot prices, with subsequent improvement in expectations, or marginal pull up lumber prices. The survey reflects that the capital chain flow at the infrastructure end has formed a blockage, and there is room for improvement in the future. In addition, the momentum of steel exports in the beginning of the year is strong and the demand for steel in the manufacturing industry is still predictable.
However, it is necessary to pay close attention to the speed and extent of the bottom recovery of molten iron production from late March to April: the improvement in export and manufacturing steel demand is also difficult to withstand the supply pressure under the high capacity.
Thread: Market expectations for peak season demand remained pessimistic last week. In this period (March 6), the centennial construction survey shows that the rate of resumption of work and labor rate of 10,094 construction sites in the country fell by more than 10% year-on-year in the lunar calendar; Building materials transactions for two consecutive weeks less than the same period last year, showing that the speed of demand recovery is slow: last week, the average price of Shanghai thread * fell 68 yuan/ton to 3735 yuan/ton.
It is expected that this week (the fourth week after the Spring Festival) the thread will usher in the inflection point to the warehouse. Last week, the demand for thread table (+ 658,000 tons to 1.789 million tons), the growth rate is less than the same period last year. Although the current demand release rate is slower, the thread production (2.205 million tons) is also at the lowest level in the past year. After the Spring Festival, the thread production increased by 283,000 tons, mainly from the concentrated resumption of production of short process enterprises (a total of 258,000 tons), and the pace of long process production was slow.
Thanks to low production, thread inventory growth was slower than the same period last year for three consecutive weeks. Among them, last week, the scope of the screw club library slowed down, but the speed of the steel plant library library accelerated, which will limit the speed of the resumption of production of long process enterprises to a certain extent.
In addition, although the loss rate of the steel mill is being repaired, as of March 8, the actual ton of steel loss of the screw thread produced by the long process steel mill in Jiangsu Province is 140 yuan/ton. Under the joint restriction of loss pressure and high factory inventory: this week, steel mills in East China postponed the resumption of production plan, and concentrated production cuts in Yunnan-Guizhou steel mills will also bring some reduction. At the same time, the rapid resumption window of short-process enterprises is closed, and the output growth rate will also slow down.
Low production with weak demand: If the thread table needs more than 2.3 million tons/week this week (growth rate of 28.6%, the same period last year was 32.4%), the thread probability of meeting the turning point to the warehouse, earlier than the same period in the past year (usually the fourth week after the Spring Festival to the fifth week) : it is expected that the bottom of the Shanghai thread price hovering.
It should be noted that the contradiction between supply and demand of thread accumulates in late March or early April, and faces the pressure of slowing down the warehouse. The balance sheet calculates that the thread production is expected to be 2.41 million tons/week in late March, lower than the level of 2.99 million tons/week in late March last year. However, on the demand side, the problem of repayment funds has not been significantly improved and the number of projects of construction enterprises has decreased year-on-year, which continues to restrict the height of the thread table, and maintains the judgment that the thread table needs to be 2.7 million tons per week in late March. As a result, the average weekly thread discharge rate in late March was 1.5%, slower than the 2.1% discharge level in the same period of last year.
Hot roll: After the two sessions, the market trading logic turns to variety fundamentals. 100 years of construction resumed work data and Mysteel research show that steel downstream demand due to the problem of funding in place to start weak year-on-year, continued to cool market sentiment: Shanghai hot roll * average price fell 36 yuan/ton to 3886 yuan/ton.
In March this year, the demand for hot rolls did not see a significant growth point, and it was difficult to push up prices. Last week, Mysteel small sample hot roll table demand increased by 120,000 tons, but last week’s table demand (3.04 million tons) hit a new low in the same period of the lunar calendar after 2020. Last week, the weekly average volume of Mysteel hot roll domestic trade also hit a new low in the past five years (Gregorian calendar and lunar calendar). Although the output of household appliances, machinery and other industries increased year-on-year in March, due to the long order cycle (generally more than 3 months), the incremental demand for steel has limited impact on the weekly data. In addition, the survey showed that steel exports in March fell or fell on the same quarter, and the demand for hot coil could not form a significant pull.
Weak demand, hot coil supply continued to rebound: last week after the resumption of steel production increased by 110,000 tons to 3.11 million tons, it is expected that the resumption of production of new steel mills this week or lead to hot coil supply continued to rise, reaching a peak of 3.22 million tons in the same period of the lunar calendar.
At the same time, the hot roll inventory pressure is higher than the same period in previous years: the total hot roll inventory inventory speed and amplitude are high in the same period of the lunar calendar, and the hot roll inventory sales were 10.2 days last week, which is 1.3 days higher than the average in the same period of the past three years. However, with the gradual recovery of demand in the peak season, the inflection point of hot roll to the library is approaching, and the price or start to grind.
Iron ore (831, -47.50, -5.41%) : The average weekly price of PB powder in Qingdao Port last week was 891 yuan/ton, down 15 yuan/ton from the previous week, and the decline slowed down. The expected bottoming out of hot metal production and steel accumulation speed are weaker than the same period last year, and raw material prices have temporarily stopped falling and stabilized. However, some steel mills due to high inventory and pessimistic demand expectations for the future market, the active maintenance of blast furnaces or delay the resumption of production of blast furnaces led to a decline in hot metal production beyond expectations, the current national average daily output of hot metal is only 2.223 million tons, 7% lower than the average daily output of the same month last year.
This week due to the impact of individual large blast furnace maintenance and last week’s new maintenance, the average daily molten iron production or still decreased by about 10,000 tons, but it is expected that this week’s molten iron production is about to bottom out. At the same time, it is expected that after the steel began to go to the warehouse this week, with the loss of steel mills to ease, the number of blast furnaces planned to resume production will increase significantly in late March: this week, the mine price or bottoming out, but under the pressure of high port inventory and low hot metal production level, the mine price recovery space is limited.
Double coke: steel demand is not enough to start the power to drive steel prices down, superposition the increase of sudden blast furnace maintenance, the purchase demand for coke (2236, -47.00, -2.06%) is still weak: the average price of quasi-primary coke at the port last week was 2140 yuan/ton, down 18 yuan/ton from the previous week.
The average daily production of coke is lower than the same period of previous years, some speculation after the spot price fell in the superposition period, and the inventory of coke enterprises in the factory went to the warehouse for the first time in nearly two months. However, the steel mill is expected to be depressed in the future market and adopts the strategy of low inventory of raw materials; Steel steel coke inventory has fallen to a historical low, although the production of molten iron is low year-on-year, but the number of available days does not decrease but increase (12.7 days last week, an increase of 0.5 days), short-term procurement efforts are still limited.
Although the local coke enterprises announced to limit production, due to the continuous decline in the cost of coking coal into the furnace, the immediate loss of the main production areas of coke enterprises narrowed to less than 200 yuan/ton, and the coke production did not decline significantly last week. Market rumors of the fifth round of coke reduction, but at the same time, some coke enterprises sent letters to support the price decline, coke steel game intensified. It is expected that the production of hot metal is difficult to grow this week, the availability of steel coke days is difficult to hit a new low, and coke enterprises still have inventory pressure.
Although the coal mine production was slow during the two sessions, the average daily output of the sample coal mine was flat compared with the previous week, but the market feedback of coking coal (1670, -46.00, -2.68%) purchasing customers’ attitude has become cold, resulting in a significant increase in the failed auction rate. Under the pressure of shipment, high-price coal in individual regions has been reduced by 250 yuan/ton in a single week: the average price of Shanxi low-sulfur main coking coal * fell by 160 yuan/ton to 2250 yuan/ton last week. In addition, from the import point of view, the current supervised inventory of Ganqi Maodu port is still more than 2.7 million tons, and the risk of top warehouse has not been alleviated.
It is expected that coal supply will continue to grow in the first quarter, although there are coal mine production reduction expectations, but there is no actual impact on the spot market, and coal prices are weak and volatile.
