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The steel market will not show a big ups and downs in April

Apr. 09, 2019

After a small correction in steel prices in late March, it has re-emerged in April. Among them, on April 8th, iron ore prices took the lead, and the futures 1905 contract broke through the 700 yuan/ton mark, leading the black line. As of April 4, the spot price of iron ore rose by 6.86% last week, and the rebar and hot rolled coils rose by 1.54% and 1.3% respectively, while the prices of coke and scrap fell slightly.

At present, the expected high point in the second quarter has not yet appeared, and there is still room for growth in the market. Can this round of market be in a position?

From the perspective of supply, the increase in supply is unquestionable. On the one hand, the end of the heating season, the steel mills increased overall production; on the other hand, the electric furnace steel has profit, and the operating rate is further improved. According to the statistics of relevant institutions, as of April 4, the output of rebar reached 3,448,200 tons, an increase of 57,200 tons on a week-on-week basis; the output of the five major varieties increased by 217,700 tons, of which hot-rolled coils increased by 94,300 tons. According to the comprehensive analysis of the market situation, the blast furnace was further reduced in the first half of April. Except for Tangshan, Hebei, the heating seasons of steel mills in Shanxi, Shandong and Jiangsu continued to end, and the output resumed. The supply will continue to increase in the second quarter. As the steel price rises, the profit of electric furnace steel wool increases, and the speed of resumption of production accelerates. It is expected that the heavy volume will be further reflected in April.

From the demand point of view, in April, the infrastructure construction rate was further improved. The author learned from the first-line construction enterprises that the demand for steel this year will not be lower than 2018. Some construction sites entered the tender in April and implemented the procurement plan. In addition, sheet stocks declined rapidly, indicating an increase in orders from manufacturing companies. In addition, speculative demand also began to increase in April, and began to operate in conjunction with futures. Demand volume can be verified from both steel inventory and market volume. It is expected that the situation of both supply and demand in April will continue further.

However, the steel market still does not have the conditions for a big ups and downs. Because the steel price does not have the unilateral rising conditions, the increase and decrease of production and the change in demand elasticity, and the suppression of speculative formation by VAT adjustment have all affected the market. After the Spring Festival, the steel market was twice disrupted by the supply of iron ore. The expected speculation in April was further improved, and there was a good speculation basis. This provided a basis for the continuous increase in iron ore prices this year. But this does not mean that iron ore prices will rise, iron ore production and shipments, inventory, etc. will affect the market rhythm.

At the same time, we must also see a positive policy. Both fiscal policy and monetary policy as well as environmental protection and production restrictions are more favorable. It can be said that the steel market has a bottom.

In summary, it is expected that the steel market will not show a big ups and downs in April. If you start to rise too fast in April, you will face the possibility of a correction in the middle and late, but the magnitude will not be too great, and prepare for the next step.

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