Limited space under the rebar

 This year's rebar market can be described as magnificent. Trading inflation was expected at the beginning of the year. Trading supply began to shrink in March. After May, the market cooled down and returned to rationality. It is still under adjustment and continues the policy and market game.

Supply is the core　　

　　Supply is an important factor this year, and the rebar market "supplies for success, but also supplies for failure." In the context of carbon neutrality, this year's steel mill operating rate has been maintained at a relatively low level in the past five years. However, data show that the supply of molten iron to 247 steel plants is at a historical high, and the supply has continued to rise since May. Crude steel production is also at a historical high, reaching 3.04 million tons per day. Rebar production has fallen in the past three weeks, but it is still at a relatively high level. Crude steel output from January to April increased by approximately 55.1 million tons compared with the same period in 2020, and the adjustment of production restriction policies must be followed up.

Expectations of weak demand

　　 The demand side has been performing well, but due to the price drop, the market has panicked. After mid-May, speculative demand has declined significantly, and the transaction volume of building materials has declined. The apparent consumption of rebar has been declining continuously in the past two weeks, and the market had previously expected that the demand would peak in stages. The recent decline in the profits of steel companies, combined with the arrival of the southern rainy season, is expected to gradually enter the off-season in the downstream market in the next July and August, and weaker demand is expected to cause a drag on steel prices.

　　Recently, the destocking speed of rebar stocks has slowed down. Among them, the social inventory of rebar has a good trend of de-stocking, but with the decline in speculative demand of traders, steel mills are difficult to get out of the warehouse, and the stocks have been accumulated for two consecutive weeks.

Profit compression

　　 What needs to be focused on in the future is the profit of rebar, especially the impact of industrial profit on supply in the adjustment of production restriction policy. The profit of rebar production has shrunk sharply since the 13th of last month. In terms of long processes, the spot profit of blast furnaces has shrunk to 253 yuan/ton at the lowest point; in terms of electric furnaces, the profit of rebar production in East China has dropped to 216 yuan/t. The profit of steel companies has declined, the demand for medium and high-grade iron ore has declined significantly, and the demand for low-grade iron ore has relatively increased. At the same time, it should be noted that the cost supports the price of rebar.

Structural change

　　 Microscopically, the valuation advantage of rebar has been greatly discounted compared with the previous period. Basis spreads weakened, and monthly spreads also narrowed. Since the beginning of the year, the market structure has changed from deep BACK to almost flat.

In general, the short-term rebar prices may be under pressure due to the easing of the temporary supply tightness and the slowdown in demand. However, in the medium term, we still need to observe the implementation of the policy. The overall supply is still tight. Under the support of cost, the lower space may be Limited, and at the same time beware of recurring waves on the supply side.