Original Lange Steel Gao Dazheng Lange Steel Network July 21, 2020

Recently, the steel market has continued to strengthen, prices have remained high, and various data have continued to hit new highs, giving people a feeling of hot market. Whether the steel market is hot or not, steel traders seem to have the most say. Their recent sharp decline in trading volume seems to be sending a bad signal. Behind the "off-season" market, some risks deserve vigilance.

The steel market is strong, and steel prices have been on the rise. As of July 21, the Lange Steel Network Steel Price Index was 146.1, still at a relatively high level, only 0.3 behind the highest point this year, and only 0.1 behind last week's high. Last week, the prices of iron ore and steel billets all hit new highs for the year, driving the price of steel to rise again and again. Among them, the prices of hot-rolled coil, medium and heavy plates, and hot-rolled strip all hit new highs during the year, which shows how hot the market is.

Steel prices have risen, but individual building materials have differentiated. Among them, the price of grade 3 rebar is relatively stable. According to data from Lange Steel Network, as of July 21, the average price of Grade 3 rebar (25mm) in key cities across the country was 3,738 yuan/ton, which was basically the same as the previous month. The price of hot rolled coil was 3883 yuan/ton over the same period, an increase of about 100 yuan per ton compared with the previous month. The steel market basically showed a slight increase in long products, while the market for plates and pipes rose significantly. It can also be seen that the construction industry is still in the off-season due to the rainy and high-temperature climate in the north, but the off-season effect of the manufacturing industry is not obvious.

As steel output has increased for four consecutive months, and the current blast furnace operating rate remains high, the output of building materials is still at a high level, which has put a lot of pressure on inventory. Superimposed on the off-season impact, the social inventory of building materials has continued to increase, and the accumulation rate has accelerated.

Lange Steel Network data shows that as of July 17, the social inventory of building materials was 9.054 million tons, an increase of 5.9% from the previous month, and an increase for 4 consecutive weeks. Among them, on July 10, there was only an increase of 17,000 tons from last week, but an increase of 216,000 tons in the last week. The increase rate is very obvious.

As the weather vane of the steel market, billets have increased their inventory more earlier. According to data from Lange Steel Network, on June 5, Tangshan billet inventory was 218,000 tons, an increase for six consecutive weeks. As of July 17, it was 365,000 tons, an increase of 147,000 tons, an increase of 67.4%. The rapid increase in inventories will inevitably bring market adjustment pressure.

The news released by the China Iron and Steel Association on the 20th was confirmed. In June, the demand for steel in the domestic market was strong, and steel prices continued to rise. In July, the domestic market was affected by the floods in the south, and steel demand slowed down.

The sharp drop in transaction volume of steel traders is worthy of vigilance. Lu Renhong, general manager of Beijing Zhuzong Technology and Trade Holding Group, and Cheng Wei, manager of the spiral department of Beijing Kaixuansheng Metal Material Sales Center, both said that the recent shipments are not good. According to Mr. Lu, shipments have been reduced by about half compared with the previous month. First, steel prices are higher, and second, the impact of the Beijing epidemic. She judged that prices were basically consolidating in August and the possibility of an increase is small.

Zhang Xuyang, general manager of Qingdao Kyushu Material Supply Chain Finance Center, said that in the last two weeks, the shipment volume has decreased by about 30% compared with the previous period, mainly because of the more rain in Shandong and the pessimistic price expectations of the downstream. He said that this year's high inventory will be normalized, and future demand can be expected.

Zhang Ying, general manager of Beijing Ruichao Xinglong Trading Co., Ltd.’s situation is better. She said, “Recently, the shipments have been good, with six to seven thousand tons a day, which is quite normal. Some time ago due to the high price, the transaction volume was low. Turned down, the transaction volume has increased. The market demand is relatively strong." She estimated that there will be another price correction this month, and the overall trend is positive in the future.