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Steel prices fell slightly, how do steel traders view winter storage?

Time: Sep 23, 2020 Views: 0

This week, steel prices have dropped significantly, and both rebar futures and spot prices have declined to varying degrees. Under the influence of the rebound in steel stocks and the continued weakening of steel demand, will there be room for further decline in steel prices in the future? Can steel traders complete their "winter storage" before the year before?

According to the monitoring data of the Lange Steel Cloud Business Platform, as of January 13, the average price of grade 3 rebar (Φ25mm) in the top ten major cities in China was 4322 yuan/ton, a cumulative drop of 54 yuan/ton for three consecutive days, a drop of 1.23 %; It is 533 yuan/ton higher than the same period last year, an increase of 14.07%. The decline in rebar futures prices has been even more pronounced, with sharp intraday volatility recently. On January 13, the main rebar futures contract on the Shanghai Futures Exchange closed at 4,293 yuan/ton, down 11 yuan/ton, or 1.26%; the "three consecutive declines" fell by 194 yuan/ton, or 4.32%; up from the same period last year. To 763 yuan/ton, an increase of 21.61%. Although the current rebar spot and futures prices have fallen to a certain extent, they are still at a relatively high level compared with the same period last year. Therefore, the current price is not very attractive for "winter storage".

Steel prices fell slightly, how do steel traders view winter storage?

This year, the Chinese New Year of the Lunar New Year will be in February, which has been postponed compared to previous years. The steel market has gradually returned to calm in January this year after rushing to work in the fourth quarter of last year. At the same time, under the influence of extreme weather in winter, the shutdown of outdoor construction projects has accelerated. In addition, the recent increase in the risk of the epidemic in some areas in China has resulted in the emergence of emergency measures such as village closures, city closures, and centralized quarantine, which has caused construction and logistics to be blocked, so that the demand for steel has dropped significantly recently.

Steel traders on the front line of the market also indicated that their shipments have dropped significantly recently. Zhang Ying, general manager of Beijing Ruichao Xinglong Trading Co., Ltd., said that the current shipment situation is average and logistics shipments are not smooth due to the epidemic. Zhang Xuyang, general manager of Qingdao Kyushu Material Supply Chain Finance Center, said that since late December this year, shipments in Shandong have significantly decreased, mainly due to the impact of the epidemic and non-compliance of environmental protection standards in the second half of the year, leading to early suspension of construction projects on site.

With the decline in demand, the social stocks of steel and steel mills have rebounded, and the rate of recovery has accelerated significantly. According to the monitoring data of the Lange Steel Cloud Business Platform, on January 8, the social inventory of 29 key cities on the Lange Steel Network was 8.212 million tons, an increase of 512,000 tons from the previous week, an increase of 6.65%, compared with last week. Speeded up by 5.76 percentage points.

As demand drops and inventories rise, the current market supply-demand relationship has changed. Will steel prices fall off a cliff? Wang Guoqing, director of the Lange Steel Research Center, said that although the current contradiction between supply and demand in the market has reappeared, as the prices of iron ore, coke and scrap steel continue to rise, the current cost of supporting steel prices is very obvious. Therefore, it is difficult to see a sharp decline at present, and it is expected that there will be a period of weakening in the market years ago.

With the decline in steel prices, have steel traders already started winter storage? Zhang Ying, general manager of Beijing Ruichao Xinglong Trading Co., Ltd., said that as part of the passive "winter storage" of the agreement, the company is currently considering whether it will actively "winter storage". In addition to the price, it will also be based on the current shipment. It depends on the situation.

Zhang Xuyang, general manager of Qingdao Kyushu Material Supply Chain Finance Center, said that he is more optimistic about the market in the first half of next year. In addition to the agreed amount, the company will also carry out certain winter storage based on downstream construction projects. The higher the price, the less the storage, and the lower the price. Reserve some. Zhang Xuyang said that due to the impact of the epidemic and environmental protection this year, construction projects in Shandong have been shut down earlier than in previous years; therefore, the construction period of some projects has been delayed, and it is believed that in the first half of 2021, efforts will be made to catch up with the construction period. At present, many provinces and cities across the country advocate that migrant workers spend the Spring Festival on site, and some construction sites in Shandong are also planning to keep workers on site for the festival, striving to start work early in February, so the start of steel demand in 2021 is likely to come earlier.

Ma Li, chief analyst at Lange Steel, said that after the inflection point of demand in previous years, steel prices will gradually fall, and steel traders will begin to store in winter. However, this year's economic expectations are generally optimistic, and the futures market has performed relatively well. Although the relationship between supply and demand has changed, it has limited impact on steel prices. Therefore, it is difficult for steel traders with no agreement to make winter storage. Even if there is an agreement, they hope to reduce risks by further discussing winter storage policies with steel manufacturers.

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