Steel boom picks up expectation of "Golden Nine Silver Ten"

In recent years, the steel market has become increasingly prominent in its features of “poor busy season and no light season”. Despite the high output of crude steel, weak demand has been constraining the extent of steel price recovery, but recent changes in the market have shown that the boom in the steel market has rebounded. According to data from the China International Iron and Steel Logistics Committee, the PMI index for the steel industry in July was 48.6, which was a 0.3% increase from the previous month. Coupled with the recent macro-level positives, the decline in steel prices has weakened, gradually turning into a low consolidation pattern.

In recent years, the steel market has become increasingly prominent in its features of “poor busy season and no light season”. Despite the high output of crude steel, weak demand has been constraining the extent of steel price recovery, but recent changes in the market have shown that the boom in the steel market has rebounded. According to data from the China International Iron and Steel Logistics Committee, the PMI index for the steel industry in July was 48.6, which was a 0.3% increase from the previous month. Coupled with the recent macro-level positives, the decline in steel prices has weakened, gradually turning into a low consolidation pattern.

According to the sub-item of steel PMI, the production index continued to rise to 50.7, which was a 3.68% increase from the previous month. Affected by the drop in the price of raw materials such as iron ore, the profitability of the domestic key steel companies gradually increased, and the steel production enthusiasm was high. . The product inventory index fell 2.3% month-on-month, indicating that steel plant inventory pressure will also be reduced. The boom of the steel industry has shown significant improvement in earnings. According to the statistics of the China Iron and Steel Association, from January to June, large and medium-sized iron and steel enterprises realized a total profit of 7.479 billion yuan, of which the total profit in April, May and June were 1.16 billion yuan, 2.847 billion yuan, and 432 million yuan respectively, and the overall profitability improved month by month. . The supply of iron ore in the upper reaches of the market is significant, and it is difficult for the ore prices to rebound. The profitability of steel enterprises is expected to continue to improve.

In addition, the current low social inventory is very beneficial to support steel prices. As of July 25, the country's major steel market inventory of 12.9267 million tons, has declined for 21 consecutive weeks, the cumulative decline of 37.66%, the current inventory level has dropped 15.37% over the same period last year. From the supply side, the current inventory of terminal and dealers is at a very low level, and the steel price has fallen back to the level of a decade ago. As the steel market has stabilized, the steel prices have increased significantly in the latter period.

As the macro economy continues to stabilize and pick up, the steel market will also see positive changes in demand. As the property market is easing up, some cities have seen signs of improvement. In addition, the market has formed a consistent expectation of “steady growth”. With the arrival of “Golden 9 Silver 10”, it is expected that the overall demand of the steel market in August will improve significantly.

Moreover, the external environment of the current steel market is developing in a favorable direction. In July, a number of economic data showed signs of improvement. It can be seen that the economy started well in the third quarter and economic growth picked up gradually. In terms of macroeconomic policies, from the perspective of the content of the Political Bureau of the CPC Central Committee, the meeting emphasized the importance of economic growth and the importance of maintaining a certain speed. It is expected that the steady growth will continue to increase in the second half of the year, monetary policy will continue to relax, and economic growth will have Accelerated, demand for the domestic steel market will form a boost. In terms of industry policies, in addition to actively controlling production capacity and adjusting and upgrading industries, the industry is still in a predicament. Currently, China Iron and Steel Association is working with the financial and taxation departments to conduct research on some major fiscal and taxation issues, such as export tax rebates and resource taxes. A number of supporting policies, including the measurement of tariffs, and ad valorem, are being studied and are expected to be introduced later.

Although there is no real demand support in the short term and the funding issue remains unresolved, and steel mills still maintain relatively high production during the off-season, steel mill stocks are high, which will adversely affect the rebound of steel prices in the later period. However, overall, there are still Multiple factors favor the iron and steel industry. Coupled with the market's expectation of the “Golden 9 Silver 10” traditional peak season, the good trend of the steel industry has basically taken shape.