The off-season effect "diffusion"

  • Jan, 25th 2019

At present, the spot price of rebar is still not superior to the cost of winter storage of 3,800 yuan/ton last year. In the case of insufficient turnover, the resurgical price of rebar is obviously insufficient. On the other hand, the current total social stock of rebar is still not enough for traders to sell, and the possibility of short-term rebar prices falling sharply.

Under the background that the effect of the off-season effect continues to spread and the downstream receiving goods are still cautious, both the infrastructure investment and the environmental protection limit will weaken the steel price. In the near future, we need to focus on the progress of traders' winter storage.

Infrastructure investment has been questioned

The manufacturing expansion rate slowed down significantly in the second half of 2018, and there were even signs of contraction in the fourth quarter. Statistics from the National Bureau of Statistics show that in December 2018, China's manufacturing PMI index was 49.4, down 0.6 percentage points from November, and has fallen back below the “Glory Line”. In 2019, the macroeconomic situation remained grim, and real estate companies actively started to start pre-sale financing, but the area of ​​housing completion continued to decline. Statistics from the National Bureau of Statistics show that from January to November 2018, the total new area of ​​new housing construction in the country reached 1.889 billion square meters, an increase of 16.80% year-on-year. It still maintains a high-speed growth trend, while the total area of ​​completed housing in the country is only 669 million square meters. Rice, down 12.30% year-on-year, continued to accelerate its decline. The “anticlimactic” development model of real estate companies has caused the market to worry about the demand for future rebar terminals.

In the context of the downward pressure on macroeconomics, infrastructure projects in 2019 will become the focus of the market. The government’s increased investment in economic growth is currently widely accepted, but there are also voices of doubt, because local government debt problems remain unresolved, and continuing to increase government debt is tantamount to drinking and quenching thirst, and some debts that are about to expire may require replacement of funds. The net amount of funds flowing into the infrastructure may not be as expected.

Winter storage progress is less than expected

Currently less than one month away from the Spring Festival of 2019, rebar terminal consumption is affected by the off-season effect, and the current market demand still depends on downstream winter storage. . However, traders have been cautious in the face of the winter storage in 2019 after the 2018 "Before the Car", according to Mysteel data, as of 2019On January 10, the total social restocking of rebar was only 3,664,600 tons, an increase of 313,200 tons compared with the previous week. Although the cumulative inventory speed has been accelerated for several weeks, if it is estimated according to the current winter storage schedule, before the Spring Festival of 2019 The total inventory will be difficult to exceed 6 million tons.

In addition, the marginal role of fundamentals and positive stimulus is also gradually declining. Whether it is the repeated boost of environmental protection and infrastructure investment since the fourth quarter of last year, or the recent revision of the central bank’s overall RRR cut, More is the impact on market sentiment. At present, the spot price of rebar is still not superior to the winter storage cost of 3,800 yuan/ton last year. In the case of insufficient turnover, the resilience of rebar is obviously insufficient. On the other hand, the current total social stock of rebar is still not enough for traders to sell, and the possibility of short-term rebar prices falling sharply.

Environmental limited production has been relaxed

Since the Ministry of Ecology and Environment proposed in September 2018 that environmental protection and production have abandoned “one size fits all”, the overall national environmental protection has weakened. According to Mysteel statistics, in the middle of November 2018, the national average crude steel output reached a high of 2.7 million tons, but then entered the oscillating down channel. However, the reduction in production did not stimulate the price recovery, mainly due to two points: First, due to the off-season effect, rebar terminal consumption almost stagnate after entering the winter, coupled with speculative demand because steel prices exceed traders expectations Delayed failure to release, the main contradiction in the market is concentrated in the sales side, in the case of steel mill inventory backlog, production cuts are not enough to draw attention. Second, after the profit per ton of steel has shrunk, and the expected limit of environmental protection and production has changed, the futures price has driven the spot to fall sharply, and the superimposed winter pollution is more likely to occur. Some steel mills have begun routine maintenance and active production restriction.

On the whole, terminal consumption is stagnant, rebar prices are high, and downstream receiving orders are cautious, which is the biggest dilemma in the current market. Whether it is infrastructure investment or environmental protection, the role of environmental protection is very limited. The overall reduction of the central bank can change the market expectations, but it does not rule out only some short-term behavior. In the case that the winter storage game will continue to continue, the Lido effect will be “downgraded”. It is expected that the rebar will still be dominated by oscillation in January.