Construction steel prices in early September is expected to improve
Analysis on characteristic of steel market operating in the first half of the year.
Expectation on price rising after the spring festival would be disconfirmed, there hoarding large quantity of resources before the festival, future goods began to fall down rapidly, accompanied by stock goods in various degree. But, since March, market is in the state of digesting inventory, traders, downstream enterprises are cautious on the ordering. Rigid demanding make it sure that manufactures can guarantee production on time, but the transaction figure is much lower than that of last year. Active and enthusiasm of purchasing tend to be fallen down.
Double pressured by inflation restrain and regulation and control of real estate ,domestic economy is hard to increase, in the first half of the year, policies published with high frequency, the tightening up of currency policy make the cash flow in great tension, financing cost rising up sharply. Influenced by all those comprehensive factors, agencies and traders take the measure of de-inventory to lower the risks of capital and avoid the risks brought by price fluctuation during commercial performance.
Real estate trapped in puzzle
Since this year, regulations toward the real estate hasn’t been slacken from central government ,thus making the selling of commodity housing from previously the hottest down to the frozen point. This year the government plan to build 10000000 sets of guarantee house, because of shortage in capital and slowdown in the pace of executing and practicing of the local government. Fresh data from Housing construction department published 16th June, to the end of this May, the actual utilization of capability is 34% among the 10000000 tons guarantee housing project. In addition, National Development and Reform Commission announced a notice about the using bond financing to support guarantee housing construction, allowing eligible cooperates to apply publish bond to collect construction fund, which prior to Guarantee house building. Margin or not come together, but there are uncertainties in the later development of real estate, whether guarantee housing project can hedge the commodity house is still a puzzle.
After the small holiday of the labor’s day, futures of the deformed bars bounced from RMB 4965/Ton to RB1110 ,appearing multipoint weakening , later on in about one and half month ,price of steel futures fluctuating within RMB100/ ton ,opportunity of tend trading declining sharply, so do the transaction enthusiasm. But since June, according to the tendency of steel consumption, there is no outcome for the repeated shocking the prices RMB4900/ton .the price of the steel futures appear a tentative situation, the lowest even come to RMB 4671/Ton, considering the price gap between stock goods and future goods is very large. The settlement day of the main force is approaching, leaving little time for the stock goods to follow dropping, there maybe Coercing Position. Thus lots of interests arbitrage, speculation appears. In the mean time, main capital of short selling, taking the advantages of lowering the inventory, accomplished the protection of the position.
With regard to the price tendency of the futures and stock steels in the third dseason, we think the main factors coming from the orientation of macro-policy; dominated focus is guarantee housing situation .if this adjustment is sufficient, it predicted that there will be a price rising in the beginning of September.
With the successive rainy weather, droughts and floods in partial regions are turning serious, construction steels enter into slack season.
The demanding on the steels turn down sharply since mould raining season, which intensified in the region Shanghai. According to data from price watching of Border Tong Bao, the purchasing of the steels is descending speedily, which lead to fall after rising of the price in stock market.
From the aspect of steel factory, following last week , , After BAO STEEL ,as the pole in the steel market, lowering the price of the main products , An gang and Wu gang followed the price lowering step since July. Beside after the price of wire rod, used in construction, slightly rising, price of the products like steel plates depreciated overall. Shagang, whose main products are construction steels, take on a cautious attitude toward it, price of deformed bars and wire rods keep stable.
In addition, from the situation of inventory, there appears the sign of stagnation from the process of de-inventory in the construction steel market. Statistics from China’s steel price net showed that there are rising in the stocks continuing for two weeks. Last week (from 13th June to 17th), the inventory of the deformed bars turn from descending to rising nation wide, perhaps it means there will be more and more warehouses for the construction steels .
However, as the tendency of the demanding on the dropping and the inventory on the rising become more and more obviously, the trend of price lowering on raw materials not showed that much. Customer’s statistics shows that the average CIF price of the imported ore reached USD4167.15/ton rising USD $6.7/ton compared to April, Reaching the highest level in history relatively rising ratio is 4.18%, in contrast to 30.06%;later in May, price of domestic iron ore concentration ,coking coal, metallurgical coal and steel scrap nearly the same with that of April, but the rising ratio is 14.23%,14.09%,6.71%,27.12% respectively compared to the same time of last year.
In contrast, analysis from price watching net of China’s steel, funnel price are at high level and have no sign to drop, together with standing out of contradiction between supply and demand ,all of which add great cost pressure to steel enterprises. But with the peak season coming of the steel demanding traditionally, there will be a driving force toward the steel demanding. It is estimated that the demanding of the steel is affected by the high temperature together with rainy since June to July, the market will be characteristic by fluctuating, but the price of deformed bars in the later of the year , will keep a relatively large oscillating amplitude, still there may be a rising trending between September and October