Steel prices or will return to value, steel profits will return to a reasonable level

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Source: Date:2016-06-15

Recently, the iron and steel market has a very striking feature, that is, the steel stocks represented by rebar have shown a dramatic decrease in succession, especially in East China, where the construction of steel is the most outstanding. According to the data show, May 26, 2017 in East China (Fuzhou, Hangzhou, the first city of Hefei, Ji'nan, Nanchang, Nanjing, Shanghai) steel total inventory 777 thousand and 500 tons, compared to the year 1 million 702 thousand and 700 tons of steel stocks highs, has been reduced by 54.37%.
At that time, East China's rebar stock has been a new low since February 2016, a decrease of 214 thousand and 600 tons compared with 992 thousand and 100 tons in the same period of the previous year.
Inventory reduction is nothing more than two aspects, one point is the supply cuts, and the other point is the need to add. The iron and steel supply side of this one occupation change national policy like a raging fire, the formation of small steel mills, frequency furnace, ground of steel production capacity of the exit, resulting in iron and steel supply have a gap, especially steel impact, but from the steel production situation, this is not the main factors continue to reduce inventory.
According to the National Bureau of statistics data, in 2017 1-4 months, China's crude steel output value of 273 million 870 thousand tons, an increase of 4.6%; pig iron output value of 238 million 210 thousand tons, an increase of 4.2%; steel output value of 357 million 830 thousand tons, an increase of 1.7%. In April China crude steel output 72 million 780 thousand tons, an increase of 4.9%; pig iron output of 62 million 580 thousand tons, an increase of 5.4%; steel output 94 million 900 thousand tons, an increase of 0.5%; the national average crude steel output 2 million 426 thousand tons, an increase of 4.45% compared to March; the average daily output of 2 million 86 thousand tons of pig iron, an increase of 4.3% compared to March; the average daily output of 3 million 163 thousand tons of steel, an increase of 1.34% compared to March.
From the above data can be seen in April China crude steel and pig iron output both before Shi Xingao hit, one hand marked was steel productivity remains high; on the other hand also marked the withdrawal of steel has been achieved, the small mills exit left the supply gap of large and medium-sized steel enterprises to increase production has fundamental compensation. To sum up, the main reason for the formation of such a large inventory decline is at the required end.
Need to end the strong, in the year of excavator sales can be seen in one spot, the construction machinery career rebound can fully reflect the foundation construction investment continued to improve. The construction of steel mainly consumes steel, some of which are house building (including commercial housing construction and commercial real estate construction) and infrastructure construction (mainly including transportation, water conservancy, power, public facilities, etc.). This year, the state has increased efforts to regulate and control the real estate profession, and the overall investment plan of the real estate is equal to that of the previous year. This is a piece of this year to speed up the construction of appropriate national infrastructure, infrastructure continues to become stable and steady increase of the primary contribution strength, the plan is estimated at about $16 trillion, accounting for 23.8% of total fixed assets investment, infrastructure investment growth will persist in 2017 estimated about 20%.
At that time, iron and steel shopping malls, especially rebar stores, is very reminiscent of last year's "double coke" market. In the coal supply side occupation change in the background, "double focus" value decreased significantly, resulting in the "double focus" supply shortage for several months, the double focus also offers hit record highs, femoral artery and all black commodities double quotation. When the steel supply is not cut, but there is a strong need to form the supply gap in the short term is difficult to change, although there is no gap of one year "double focus" so serious, but the amount of reduction will cause price increases, the steel market price is expected to continue upward.
By China steel rebar is unprecedented profit per ton of steel, steel price index in May 26th that 3858.24 yuan / ton, the spot cost is 2725 yuan / ton, the profit per ton to 1133 yuan / ton. Such high steel mills are profitable, and we can not help worrying that steel prices are unlikely to remain high. But in my opinion, high profits bring high supply, which is the major risk of dropping quotation. At that time, the domestic mainstream steel mills under the influence of sustained high profits, the output value has already reached a high level, and in considerable profit situation, more tightening production, delayed maintenance, and now some steel mills or have to repair the situation. To sum up, the supply of steel continues to rise, the amount is not large.
At that time, the author is most worried about the climate, the domestic temperature in July and August is about 40 degrees, so that the construction time is significantly shortened, especially the construction of steel is the most significant. Outdoor construction site like a furnace, workers how to construction, heat stroke, who will play?. The construction of the project construction progress slowed, the acquisition of construction steel will be significantly reduced, in this condition by the need to remain strong price or loose steel profit worries in this situation unprecedented will become abnormal outstanding.