Does the price turning point mean the start of a big drop?
Release time: 2022-02-16
Last weekend, the National Development and Reform Commission supervised the iron ore market. On February 14, the black commodity futures market fell sharply. Iron ore futures prices fell 6.84%, rebar fell 3.39%, and hot coil fell 3.54%.
Due to the sharp drop in steel futures prices, domestic steel spot prices also fell across the board while demand was still weak.
On the afternoon of February 14, the inventory data released by the China Iron and Steel Association showed that the increase in social steel inventories in various cities has expanded compared with the previous period, an increase of 4.48 million tons or 56.9% over the beginning of the year; an increase of 650,000 tons over the same period of the previous year, The increase was 5.6%.
The National Standing Committee held on February 15 emphasized that we will continue to do a good job in ensuring the supply and price of bulk commodities, and keep prices basically stable. At the same time, a notice of meeting circulated in the steel market, the National Development and Reform Commission, the State Administration for Market Regulation and the China Securities Regulatory Commission will interview some iron ore trading companies and hold a special meeting of reminders and warnings.
On February 15, iron ore futures prices plummeted 9.98% and closed at the limit down. Rebar and HRC futures continued to tumble more than 2%.
Zhonggang believes that the inflated price of the iron ore market must be regulated. Since the beginning of this year, the supply of iron ore in the iron ore market has been relatively loose, and the demand has continued to decrease, while the price has been rising steadily. . In the current environment of weak supply and demand in the steel market, the rising trend of iron ore prices will be curbed, the price of thermal coal has been capped, and the prices of coke and steel billets cannot rise.
In addition, according to public reports, China Iron and Steel Association has reported the "Cornerstone Plan" to the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Natural Resources, and the Ministry of Ecology and Environment, that is, through the development of new domestic iron ore, and overseas new equity iron ore and scrap steel resources development, to achieve the right to speak on the supply and price of iron ore.
As one of the largest steel production enterprises in the world, Baowu Steel will establish a raw material supply company to conduct centralized procurement of steel raw materials. This move will play a huge suppressive role in the disorderly rise in the prices of steel raw materials, including iron ore, and is also the best response to the National Development and Reform Commission's regulation of commodity prices.
So will domestic steel prices plummet?
In the near future, the price of steel is likely to drop slightly, but not too much. There are three reasons:
First, the steel market sentiment has changed. In recent days, there are not many downstream purchasers, and purchases at lower prices. The bullish sentiment in the market has changed to cautious purchases and sales.
Second, after the holiday, steel mills have significantly increased their ex-factory prices, with neither cost-side support nor demand-side support. The National Development and Reform Commission regulates the iron ore market and the steel market from the side, and the sentiment of price increases has become restrained.
Third, affected by environmental protection, production has been restricted to varying degrees in various places. This week, the operating rate of coke enterprises has declined, and some coke enterprises have already experienced high inventory. During the Winter Olympics, steel mills have further tightened production restrictions, with general purchasing intentions and weak demand. Currently, most of them are consuming inventory. Superimposed on the continuous reduction of coking coal prices, coke cost support is insufficient, and mainstream steel mills are still willing to increase or decrease their own inventories.
Institutions and market analysts have different views on the overall market situation in 2022.
Jiang Lu, chief analyst of futures industrial products at CITIC Construction Investment (601066), told a reporter from Securities Daily: "In 2022, under the precise control of policies and the increased supervision of the state on behaviors such as price speculation, steel prices will continue to soar. Insufficient power, the overall supply and demand tend to be loose, and the price center will move down. At the same time, under the dual-carbon target, the status of electric furnace steelmaking will be improved, scrap steel is expected to become a bright spot in the sector, iron ore demand will continue to be under pressure, and prices will continue to remain low. The tight supply of coking coal and coke tends to ease, and prices tend to fall."
However, the research report of Zhongtai Securities (600918) believes: "The steady growth in the spring of 2022 may push prices to continue the oversold rebound since the end of 2021, and after the steady growth pulse, the second half of the downward demand cycle may resume. With the return, coupled with the risk of loosening the steel production limit policy, it is expected that steel prices will fall back after the spring."
Due to the sharp drop in steel futures prices, domestic steel spot prices also fell across the board while demand was still weak.
On the afternoon of February 14, the inventory data released by the China Iron and Steel Association showed that the increase in social steel inventories in various cities has expanded compared with the previous period, an increase of 4.48 million tons or 56.9% over the beginning of the year; an increase of 650,000 tons over the same period of the previous year, The increase was 5.6%.
The National Standing Committee held on February 15 emphasized that we will continue to do a good job in ensuring the supply and price of bulk commodities, and keep prices basically stable. At the same time, a notice of meeting circulated in the steel market, the National Development and Reform Commission, the State Administration for Market Regulation and the China Securities Regulatory Commission will interview some iron ore trading companies and hold a special meeting of reminders and warnings.
On February 15, iron ore futures prices plummeted 9.98% and closed at the limit down. Rebar and HRC futures continued to tumble more than 2%.
Zhonggang believes that the inflated price of the iron ore market must be regulated. Since the beginning of this year, the supply of iron ore in the iron ore market has been relatively loose, and the demand has continued to decrease, while the price has been rising steadily. . In the current environment of weak supply and demand in the steel market, the rising trend of iron ore prices will be curbed, the price of thermal coal has been capped, and the prices of coke and steel billets cannot rise.
In addition, according to public reports, China Iron and Steel Association has reported the "Cornerstone Plan" to the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Natural Resources, and the Ministry of Ecology and Environment, that is, through the development of new domestic iron ore, and overseas new equity iron ore and scrap steel resources development, to achieve the right to speak on the supply and price of iron ore.
As one of the largest steel production enterprises in the world, Baowu Steel will establish a raw material supply company to conduct centralized procurement of steel raw materials. This move will play a huge suppressive role in the disorderly rise in the prices of steel raw materials, including iron ore, and is also the best response to the National Development and Reform Commission's regulation of commodity prices.
So will domestic steel prices plummet?
In the near future, the price of steel is likely to drop slightly, but not too much. There are three reasons:
First, the steel market sentiment has changed. In recent days, there are not many downstream purchasers, and purchases at lower prices. The bullish sentiment in the market has changed to cautious purchases and sales.
Second, after the holiday, steel mills have significantly increased their ex-factory prices, with neither cost-side support nor demand-side support. The National Development and Reform Commission regulates the iron ore market and the steel market from the side, and the sentiment of price increases has become restrained.
Third, affected by environmental protection, production has been restricted to varying degrees in various places. This week, the operating rate of coke enterprises has declined, and some coke enterprises have already experienced high inventory. During the Winter Olympics, steel mills have further tightened production restrictions, with general purchasing intentions and weak demand. Currently, most of them are consuming inventory. Superimposed on the continuous reduction of coking coal prices, coke cost support is insufficient, and mainstream steel mills are still willing to increase or decrease their own inventories.
Institutions and market analysts have different views on the overall market situation in 2022.
Jiang Lu, chief analyst of futures industrial products at CITIC Construction Investment (601066), told a reporter from Securities Daily: "In 2022, under the precise control of policies and the increased supervision of the state on behaviors such as price speculation, steel prices will continue to soar. Insufficient power, the overall supply and demand tend to be loose, and the price center will move down. At the same time, under the dual-carbon target, the status of electric furnace steelmaking will be improved, scrap steel is expected to become a bright spot in the sector, iron ore demand will continue to be under pressure, and prices will continue to remain low. The tight supply of coking coal and coke tends to ease, and prices tend to fall."
However, the research report of Zhongtai Securities (600918) believes: "The steady growth in the spring of 2022 may push prices to continue the oversold rebound since the end of 2021, and after the steady growth pulse, the second half of the downward demand cycle may resume. With the return, coupled with the risk of loosening the steel production limit policy, it is expected that steel prices will fall back after the spring."
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