There is still room for decline in the steel marke

2022-08-16
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There is still room for decline in the steel market in December

as of November 25, the steel price in November still fell all the way, and the comprehensive steel price index fell 5.43% month on month. In terms of varieties, the long timber price index fell by 5.27%, and the flat timber price index fell by 5.62%, weaker than expected. The price of iron ore also fluctuated all the way down. The comprehensive price index of iron ore fell by 13.81% month on month, the price index of imported ore fell by 14.36%, and the price index of domestic ore fell by 12.77%, which was in line with expectations. Looking ahead to the steel market in December, there is still room for decline

the domestic macro-economy is still in a downward trend. The Federal Reserve is expected to raise interest rates in December, and commodity prices will remain under pressure. First, the leading macroeconomic indicators fell sharply, and the downward pressure on the short-term economy increased. The Baltic dry bulk extruder as a critical processing equipment index (BDI) fell to 498, the lowest value since data records began in 1988, on November 20. The benchmark container freight of Asia Europe routes fell by 70% in the past three weeks, the most serious decline since 2008. This shows that the global total demand is insufficient and the momentum of economic growth is declining. Secondly, the high expectation of the Federal Reserve to raise interest rates at the end of the year will further impact the global economy and keep commodity prices under pressure. The commodity CRB spot index continued to decline and remained at a six-year low in the past two weeks. In the futures market, there has also been a continuous sharp decline, which is difficult to improve in the short term. Moreover, funds were under upward pressure in December, and there was limited room for downward interest rates at the end of the year. Seasonal factors at the end of the year, new share issuance, exchange rate fluctuations after SDR evaluation and the Federal Reserve's interest rate hike may cause great disturbance to the end of the year capital. Short term capital prices have risen slightly. On November 20, the 7-day repo rate between banks decreased by 2.6 basis points to 2.32%, and the 14 day, 21 day and 1-month repo rates increased by 4.1, 7.2 and 4.0 basis points to 2.68%, 2.79% and 2.76% respectively. The yield curve of interest rate bonds continues to flatten and rise, with the short end rising and the long end falling at the end of the year with limited space; Note yields rose for three consecutive weeks, and credit spreads rebounded slightly. The one-year Treasury yield rose 1.8 basis points to 2.58%. Under the transformation of the governance mode of "moderately expanding demand and strengthening supply side structural reform" proposed by General Secretary Xi, there is little possibility of fiscal and monetary water to stimulate the economy in the near future

from the perspective of industry, there is still pressure on short-term supply and demand. On the one hand, the inventory of sample steel mills counted by CISA remained at a high level of 15.029 million tons in the first ten days of November, while the national weight of the five major varieties counted by Mysteel steel division was only in the absence of national standards, industrial standards and local standards. The inventory of enterprises in the factory also reached 5.576 million tons on November 20, which continued to grow. Especially, the inventory of steel billets in Tangshan remained at a relatively high level of 603000 tons on November 20, As long as the billet inventory is maintained at a high level, the ore price will face pressure under the background of material loss, ore surplus and declining demand. On the other hand, the relative decline of supply and demand is not strong. The current demand situation is worse than that in July, but we noticed that the blast furnace capacity utilization rate of 163 steel plants fell to 83.25% on November 20, slightly lower than the low of 83.45% on July 17. Although some enterprises are shutting down, it still seems that the strength is not enough. In addition, short-term export pressure has increased. Due to the continuous decline of steel prices, foreign prices have also followed one after another. If the working temperature is good and in the range of 100~300oc, the risk of Importers' import increases. Therefore, importers have a strong wait-and-see atmosphere, which also increases the pressure on domestic sales. The short-term financial pressure on steel mills will increase. In addition to increasing the occupation of raw fuel inventory funds due to the advent of winter, it is also facing the pressure of declining ordering funds caused by the reduction of agreement volume in the new year, as well as the pressure of destocking caused by the decline in demand. Northern resources are under pressure from the south. Although Beicai will come to the South later this year, and the volume is smaller, it should gradually appear in December, and put pressure on the price of the southern market. Downward pressure on raw fuel prices. As the seasonal fall in demand and continuous losses force steel mills to further reduce production, the demand for raw fuels still has room to fall, and the price also has room to be further suppressed. It is expected that the physical price of iron ore should be hit to $40 or less in this round of steel price decline. Therefore, the cost has little support for steel prices

due to the decline of commodity prices in this round, multiple influencing factors are superimposed, and the interaction of futures and spot prices, the decline is very deep and the decline time is relatively long, which is easy to cause oversold rebound. It is understood that both industry and financial customers have the desire to copy the bottom. Especially in spot, when the price reached about 1600, someone began to try to get the goods. In addition, more and more people are bullish on 1605 snail, and it is likely that the spot market will follow the periodic rebound with the long rebound of the contract. In addition, once the dust of the Federal Reserve's interest rate hike expected for nearly a year is settled, it is not ruled out that there will be phased bad digestion, but it will become good, which will trigger a rebound in the commodity financial market, and then drive the spot market to stabilize or even rebound, but the rebound space is also limited

in a word, in December, under the influence of the continuous macroeconomic downturn and the Federal Reserve's interest rate hike, the price of steel market still has little room to fall, but with the landing of "boots", some regions and varieties are expected to stabilize or even rebound

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