Sustained oversupply of raw materials

Since Shanghai Rebar ** bottomed out at 4,000 yuan/ton mark on May 23, the price of thread has followed the overall rebound of the commodity market, maintaining a slight slowing up trend. The recent main contract RB1210 has stabilized at above RMB 4,100/t. Because of the first interest rate cut by the central bank in more than three years in early June and the satisfactory results of the elections in the Eurozone’s Greek parliament, market sentiment is gradually optimistic about the market outlook. On the one hand, with the gradual loosening of funds, prices have remained low for several consecutive months, and expectations for the warming of the real estate market have gradually increased. On the other hand, the euro zone speculation has temporarily subsided due to the results of the Greek election, with crude oil at 80 US dollars. Get support. Therefore, theoretically there is a reason for the rebar price to continue to rebound, and from the current situation of the fundamentals, the rebar is still lacking the momentum of sharp rise.

First of all, since the expansion of production capacity has been too rapid this year, capacity utilization has been declining, and the problem of oversupply has continued to increase. According to the statistics of the Iron and Steel Association, China’s annual crude steel output in 2011 was 680 million tons, with a production capacity of 840 million tons, and the capacity utilization rate was only 81.46%. From January to May 2012, China’s crude steel production capacity increased by more than 80 million tons, and the annual crude steel production capacity Over 9.2 billion tons. If calculated according to 290 million tons of production in the first five months of this year, the capacity utilization rate has actually slipped further below 80%. As long as the capacity utilization rate does not go up, it means that there is still much room for growth in the supply. Once the price rises significantly, it will inevitably lead to greater production to push prices down again. Moreover, due to the slowdown in economic growth, foreign demand is not given, and apparent consumption of steel is slower than output growth. Although with the gradual fall of economic growth and the reduction of inflationary pressure, “steady growth” has gradually become the focus of the government’s work. In the later period, investment in a series of major projects is expected to accelerate, and monetary policy also tends to be moderately loose, but the real estate control policy is not Under the destabilization, investment in infrastructure investment in steel consumption is also difficult to make up for the decline in real estate market demand, and it is difficult for the overall consumption to rise sharply. Therefore, it is difficult to effectively improve the pattern of excess supply.

Second, the price of steel charge material is accompanied by weaker steel price shocks and the lack of cost support. From the viewpoint of iron ore, although the price of imported iron ore has rebounded slightly in the past few months, the probability of downside of ore prices remains high in the medium and long term. On the one hand, there will be a larger release of new capacity from three major foreign mines in 2012-2013. In addition, more than 40 overseas countries and more than 300 iron ore mining projects are expected to generate more than 1.6 billion tons of ore production capacity during construction and planning. In 2013, they will increase production capacity by 380 million tons. With the loosening of the ore market, the sources of imported ore in China have gradually diversified. The import volume of non-three major ore mines is increasing, and the monopoly degree of the ore market is declining, making prices inevitable competition, and it is difficult to maintain high ore prices. At the same time, due to weak domestic steel prices, major steel mills have reduced ore inventory, so the current domestic port iron ore is already at a high level, and short-term also makes ore prices need to be adjusted downwards. From another major upstream coke, in the past three months, coke prices in most regions in China have dropped sharply. Overcapacity is still an important factor in the weakening of coke prices, but it is also very important that, compared with steel mills, Jiaojia is in a weak position for negotiations. Since the steel prices are currently low and profitability is poor, so far this year The steel mill's price reduction for coke has continued. Therefore, regardless of iron ore or coke, it will remain weak in the latter part of the year and there will be no incentive to increase prices.

Judging from the overall market conditions, in the short term, after entering the rainy season, it will enter the off-season, and the steel mills will conduct extensive inspections, and supply and demand will have to fall. Therefore, the price fluctuation of rebar will not be affected much. In general, due to the weak fundamentals, it is still difficult for the steel price to change the current pattern of weak shocks in the later period, and the rebound is difficult to sustain.