Last week (January 14 to 18), the domestic steel market fluctuated within a narrow range. Insiders pointed out that as the Spring Festival approached, the market trading performance was deserted, and the prices of steel traders rose and fell. In general, the steel market has relatively limited downside, and it will maintain a narrow range of fluctuations in February.
From a macro perspective, the policy is “warm”. Xu Hong, assistant to the Minister of Finance, said that this year will continue to promote the implementation of inclusive tax relief for small and micro enterprises; Lian Weiliang, deputy director of the National Development and Reform Commission, said that it is necessary to increase infrastructure investment; Zhu Hexin, deputy governor of the central bank, said To provide adequate financial support for the real economy. At the beginning of January, the People's Bank of China decided to cut the deposit reserve ratio of financial institutions by 1 percentage point; on January 17, the People’s Bank of China carried out a 400 billion yuan reverse repurchase operation by means of interest rate bidding. This will be good for the steel market.
In terms of inventory, the major steel social inventories in key cities nationwide increased on a week-on-week basis and month-on-month. According to the monitoring data, as of January 18, the main steel social inventories of 29 key cities nationwide reached 9,240,300 tons, an increase of 406,100 tons from the previous week, an increase of 1,352,500 tons from December 2018, which is basically the same as that of the same period of last year. This means that the supply pressure in the later market has increased.
From the perspective of terminal demand, the National Bureau of Statistics data shows that in December 2018, China's manufacturing PMI (Purchasing Managers Index) was 49.4%, down 0.6 percentage points from November, and has fallen back below the “Glory Line”. In addition, due to the impact of the off-season, steel terminal demand tends to stagnate after entering the winter season. Coupled with speculative demand, steel prices are too late for traders to predict, and there is a “hidden worry” in downstream demand in the short term. Although a large number of investment projects such as rail transit construction, railways, and intercity railways have been approved, which will bring some space for steel demand, it will take some time for demand to be released.
On the export side, due to the global economic slowdown and trade friction, steel exports are unlikely to pick up. However, as domestic steel prices fall to a low level, they will stimulate the export efficiency of related enterprises, and steel exports will not fall sharply. It is expected to be flat with the same period last year.
On the whole, terminal consumption is stagnant and downstream receiving is cautious. It is expected that the steel market will maintain a narrow range of fluctuations in February.
