The black system cools down! Regulatory policies are still steadily advancing, the market returns to fundamentals
On May 17, the prices of black commodity futures fell further. The main contract for hot-rolled coil fell by more than 5%, and the main contract for thermal coal fell by 3.74%. In the spot market, many steel mills lowered their steel prices, and the cumulative decline in some regions and varieties was as high as 300 yuan.
From the sharp rise at the beginning of last week to the sharp correction since the second half of the week, the market sentiment is an extreme interpretation of the market sentiment, and the current sentiment has obviously cooled. Entering this week, the control policy is still advancing steadily. In the face of further rising uncertainty in the steel supply policy, the market is returning to fundamental logic.
Steel companies in key cities were interviewed again
On May 17, domestic black commodity futures prices fell further. Among them, the main contract for hot-rolled coil fell by more than 5%, and the main contract for thermal coal fell by 3.74%.
This is the continuation of the "roller coaster" market staged in the black market last week. In the first half of last week, raw materials such as thermal coal and iron ore soared sharply. In the face of the excessively rapid rise in bulk commodities, policies have strengthened the control of raw material prices from both the spot and futures levels.
In terms of spot steel mills, including Shanghai, Tangshan City, etc., they have interviewed the city's steel companies, requesting all steel production companies to effectively strengthen price management, set prices reasonably, and cooperate with the government to do a good job in stabilizing steel prices in the steel market. In the futures market, the Commodity Exchange also adjusted the transaction fees of futures products such as rebar, hot coil, coking coal, and coke for 9 consecutive times.
Under the expectation of policy changes, the price of black products fell sharply last Thursday and last Friday. The South China Metal Index and the Energy and Chemical Index fell by 2.1% and 3.6% respectively, and individual varieties experienced a whole process from a big rise to a big drop. . From the sharp rise at the beginning of the week to the sharp correction in the second half of the week, the market sentiment is an extreme interpretation of the market sentiment.
Entering this week, the control policy is still advancing steadily. At present, the market focus is on the action of the National Development and Reform Commission's review of steel production, and it is expected whether there will continue to be new regional production restrictions documents. On the same day, the national spot market prices continued to fall sharply. Many steel mills lowered their steel prices. The cumulative decline in some regions and varieties was as high as 300 yuan.
The short-term callback is fully in line with expectations and common sense, and the market has returned to fundamental logic. From the perspective of the logical framework, so far, the three major logics of the current round of steel price increases, namely domestic manufacturing upward, overseas demand recovery, and domestic supply-side policies, have not changed. As long as domestic control measures do not release supply, their impact is very limited and short-term.
At present, the uncertainty of the steel supply policy has increased. On the one hand, the reduction of crude steel production under the background of carbon neutrality has been repeatedly mentioned in the policy. On the other hand, the sharp rise in steel prices has triggered downstream resistance. Smoothing commodity prices is the immediate policy demand. The best of both worlds is harder to achieve.
Is there room for raw material demand?
Judging from the data released by the Bureau of Statistics on May 17, my country’s average daily crude steel output in April was 3.261 million tons, with an annualized output of 1.19 billion tons, which set a new record high and greatly exceeded market expectations.
Statistics from the Bureau of Statistics also show that my country’s crude steel, pig iron, and steel output in April were 97.85 million tons, 75.97 million tons and 121.28 million tons, an increase of 13.4%, 3.8% and 12.5% year-on-year; the average daily output was 326,700 respectively. Ton, 2.5323 million tons and 4.0427 million tons, with an average daily increase of 7.5%, 5% and 4.5% respectively from the previous month. Among them, the average daily output of crude steel and steel reached a record high.
In the context of continuous high production, steel stocks in domestic steel mills and the market have continued to drop sharply, which can reflect the strong downstream demand. The release of steel output from key domestic large and medium-sized steel companies still has momentum.
It is worth noting that the current profits of steel companies are very impressive. The gross profit of one ton of hot-rolled steel reaches 1055 yuan, the gross profit of one ton of cold-rolled steel reaches 808 yuan, the gross profit of one ton of rebar reaches 704 yuan, and the gross profit of one ton of medium and heavy plates. The gross profit reached 800 yuan, which is close to the highest record in history.
Obviously, driven by such high profits, the willingness of steel companies to actively restrict production is very low. According to this growth rate, in order to achieve the goal of reducing crude steel output for the whole year, the production limit in Tangshan area alone cannot be achieved. If there are new restrictions on production in the later period, prices are expected to rebound again.
However, many market participants are not optimistic about the price of raw materials such as iron ore. The rise of iron ore is unsustainable. Although the raw material inventory continues to decline at this stage, with the implementation of the abolition of export tax rebates, the countervailing effect on the domestic demand gap is gradually emerging, and the spot price of raw materials may show a downward trend.
PPI may rise further in May
On May 17, the April PPI data released by the Bureau of Statistics rose 6.8% year-on-year, an increase of 2.4 percentage points from the previous month, setting a new high in three and a half years. Will the PPI increase further expand in the future?
From a domestic perspective, the short-term rise in international commodity prices will promote the prices of raw materials in some domestic upstream industries, which may put some pressure on the production and operation of some downstream enterprises. As for the impact of the increase in PPI, as a company as a whole, price increases are conducive to the improvement of corporate efficiency, but the pressure on downstream industries needs to be paid attention to, and effective measures should be taken to strengthen the regulation of the raw material market and promote the stable and healthy development of the company.
It is expected that the PPI growth rate in May will exceed 7% year-on-year. Under risk conditions, it may reach 8%, and the annual growth rate may exceed 5%. The growth rate of domestic social financing in May exceeded expectations and the downward trend reflected that domestic demand was still weak. It is expected that domestic monetary policy may remain stable in the short term.
The inflection point of currency liquidity in the early period has been basically confirmed. As the domestic economic recovery is peaking and the recovery momentum is gradually switching, the direction of the steel market should pay more attention to the changes in actual downstream demand. As for overseas markets, due to the unprecedented monetary easing after the epidemic, the liquidity risk is relatively high. At present, the global economic recovery and monetary liquidity are at a high point. Monetary easing has basically entered the second half. In the later period, we must pay close attention to the monetary policy changes of major economies and their Spillover impact on the market.