In the past November, affected by the rise of the futures market, the steel market ushered in a “warm winter” market. The price of iron ore futures is close to 770 yuan/ton, leading the November black futures market with a single-month increase of 22.45%; the price of rebar futures and hot-rolled coil futures is close to 3750 yuan/ton and 3870 yuan/ton, The monthly increases reached 7.55% and 8.7% respectively. The increase in steel spot market prices is generally smaller than that in the steel futures market, and the increase in steel prices is basically within 200 yuan/ton.
The author believes that the steel market staged a “warm winter” market in November, which is the result of multiple effects from the macro, capital, and fundamental aspects. On the one hand, the real estate “rescue market” policy aimed at “guaranteeing the delivery of buildings” and the “warm wind” of various policies to stabilize growth have been blowing frequently, superimposed on the continuous optimization and adjustment of the prevention and control policies of the new crown pneumonia epidemic, and the market sentiment has been restored under the stimulus of macroeconomic benefits. The futures market took the lead in driving up the spot market; on the other hand, under the background of demand resilience, the contradiction between supply and demand in the market has not been intensified due to the off-season effect of demand. On the contrary, driven by the downstream rush period, the terminal The increase in replenishment purchases provided impetus for the rebound in steel prices.
According to statistics, in November, the PMI (Purchasing Managers Index) of the steel industry was 40.1%, a decrease of 4.2 percentage points from the previous month, and a decline from the previous month for two consecutive months. Among them, the new order index was 34.5%, down 8.9 percentage points from the previous month. This shows that steel demand has shown a contraction trend. Entering December, as the demand “cools down” seasonally, the steel market must be prepared to “warm up”. In the later period, as the off-season effect continues to ferment, the speed of demand contraction may further accelerate, and the weak characteristics will become more obvious. Under such circumstances, the game between the strong expectations driven by favorable policies and the weak reality of declining demand will further intensify. Before the market finds a new equilibrium point, there is little room for steel prices to continue to rise. At the same time, due to the restart of coke price hikes, iron ore prices are still strong, and steel cost support is still strong, which will also lead to limited room for steel prices to fall. On the whole, the price trend of steel products in the short term will be dominated by high volatility.
The author believes that whether the steel market can “overwinter” smoothly this year, winter storage will become a key factor. After all, this is the window period for the last concentrated release of demand before the Spring Festival in 2023. According to the author’s understanding, the situation of this year’s winter storage is basically similar to that of last year’s winter storage: low inventory of raw materials, poor profitability of steel mills, and a pattern of “weak supply and demand” in fundamentals. The difference is that the center of gravity of steel prices this year has moved down significantly as a whole, and the social inventory of steel is at a historically low level. Although winter storage has a certain room for operation this year, under the influence of sluggish demand and repeated epidemics, the enthusiasm of steel traders for winter storage is not high at present. The current steel price is still far from the psychological price of steel traders for winter storage . The author predicts that the winter storage window will not open in the short term, and it is expected to open around the end of December. The scale and intensity of winter storage this year are roughly the same as last year. In the absence of major positive news or preferential winter storage policies for steel companies, it is difficult to release more than expected winter storage demand this year. However, under the condition of low inventory, the replenishment procurement demand brought by winter storage is still expected to drive a new round of “warm winter” market.
On the whole, under the circumstances that the cost support is solid, the macro “warmth” is full, and the demand is still resilient, the price of steel in the later period will be more oscillating. The author suggests that market participants should focus on the variety differentiation, regional differentiation, and future-current differentiation brought about by uneven demand, and at the same time seize market opportunities, optimize inventory structure, and choose opportunities for winter storage.