East China Sea Futures: Due to the dual impact of cost support and production restriction expectations, July steel prices are expected to gradually strengthen

In mid-to-late May, under the influence of intensive policies, domestic steel prices fell sharply, reversing the previous two-month increase in just half a month. Since then, production restriction policies and control policies have also acted on the steel market, and steel prices have turned into a month-long shock.

How will steel prices go in July? Donghai Futures researcher Liu Huifeng believes that after July, steel prices will gradually strengthen under the dual impact of cost support and production restrictions.

July is still in the traditional off-season of the steel market, and worries about weakening demand and increasing inventories have always been topics that the steel market cannot avoid at this stage. However, Liu Huifeng pointed out that the demand for steel has weakened in stages in the short-term, but the toughness is still there.

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According to his specific analysis, in recent months, the front-end land acquisition and new construction data of real estate investment have shown signs of continued weakness. At the same time, under the influence of the overall tightening of funds and centralized land supply, the real estate acquisition data There has also been a continuous slowdown. Under the influence of these factors, the newly started area has a high probability of negative growth. However, “in the high-turnover model, and under this model, real estate companies have accumulated a large amount of stock construction area, so that real estate investment in the second half of the year still has a certain degree of resilience.” Liu Huifeng believes.

At the same time, in terms of infrastructure, Liu Huifeng believes that after entering the second half of the year, the pace of special debt placement may accelerate. If you consider the support of the stock projects since the second half of last year, it is expected that infrastructure investment will still pick up in the second half of the year, and it can hedge some of the impact of the decline in real estate investment.

On the supply side, under the combined influence of steel mills' losses and policy-related production restrictions, steel supply in July may fall from the previous month. According to calculations by Liu Huifeng and others, the profit of long-process rebar is -300 yuan/ton, and there is still a meager profit for hot coils. The current profit is 66.64 yuan/ton. Under the influence of the earlier scrap price increase, electric furnace steel also began to lose money on a flat electricity calculation. The current profit level is -44.32 yuan/ton. “Under the dual impact of the superimposed losses in the off-season of demand, the steel mills will also increase their spontaneous production reduction and maintenance efforts.” He said that, together with the policy of reducing crude steel production, the policy will continue under the background of “carbon neutrality”. And the dual pressures of market-oriented production cuts are expected to cause steel supply to fall in July from the previous month.

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Comprehensive analysis, Donghai Futures believes that after July, steel prices will gradually strengthen under the dual impact of cost support and production restrictions. On the other hand, in terms of iron ore, the shipping volume is stable and the new production capacity is put into production. In the second half of the year, the supply of iron ore will gradually pick up. The demand side may face the dual pressure of administrative and market-based production restrictions. Under the background of gradual weakening of fundamentals, The trend of domestic production restriction policy will become the key to the price trend of iron ore.


Post time: Jul-07-2021
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