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Basic concerns of steel market in the second half of the year

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Judging from the trend of steel price in recent years, the main factors that support the price rise and lead to the price fall are nothing more than fundamental changes. From the mismatch of supply and demand in 2016, to the ban of strip steel in 2017, to the "2 + 26" production restriction in the later stage, the supply level supports the price of steel. And the price drop in recent years is nothing more than the pessimism caused by poor demand and lower than expected production limit.

Therefore, it can be seen from the change of the main price factors that it is gradually changing, starting from supply-oriented to demand-oriented. For the current and second half of 2019 market prices, it is also necessary to find out how to pave the "track" of the supply-demand relationship. We can start from the supply of raw materials, and then look at the consumption of steel, so as to push forward the trend of supply and demand in the future.

I. iron ore (885, 4.00, 0.45%) inventory gradually recovered after a sharp drop

In the first half of the year, the performance of iron ore was the most eye-catching. When the steel price fell, it was the ore that "propped up" the cost of steel, which made the steel market not continue to fall deeply. At the same time, it also gave the steel market some momentum in confidence. However, for iron ore, the first half of the year was a "twists and turns". The value mine disaster, hurricane damage to the wharf and so on, made the mine market once enter a period of dispute. Then the rapid decline of port inventory made the iron ore up to $100, which also reached a new high price in recent years.

In the near future, the inventory of 45 ports is also in a low position, which has reached nearly 110 million tons. However, with the influence of the early stage gradually fading, iron ore production and transportation capacity are gradually restored, and the whole supply and port arrival will increase to a certain extent, while the decline of port inventory will be significantly narrowed. The main reason lies in the increase of domestic environmental protection production restriction. Many cities are held responsible for air quality problems, which makes the environmental protection policy more strict. In addition, the increase of supply will undoubtedly lead to the gradual recovery of iron ore inventory in the whole port.

II. Steel supply may increase slightly

With the continuous increase of electric furnace capacity and output in recent years, the overall crude steel output is also gradually increasing, which undoubtedly increases the overall supply of finished materials. Although environmental protection has a certain impact on the output, the overall level of environmental protection process equipment has been significantly improved, and the capacity utilization rate has been improved to a certain extent.

As the profit shrinks, the scrap ratio of the steel plant decreases year on year, and the capacity utilization ratio of the released scrap for the electric furnace increases. In 2018, the effective ironmaking capacity of the blast furnace is 1.05 billion tons, and that of the electric furnace is 130 million tons. It is estimated that in 2019, the effective ironmaking capacity of the blast furnace is 1.058 billion tons, and that of the electric furnace is 145 million tons. It is estimated that in 2019, the pig iron will increase by about 19 million tons year on year, and the crude steel will increase by about 30 million tons year on year.

III. overall consumption or slight increase of downstream steel

Although the overall weekly consumption of steel is rising, there is also a certain differentiation, especially the sharp contraction of production and sales volume in the automobile industry, which makes the plate become the "laggard". However, the increase of infrastructure investment and the rise of steel structure industry have not lowered the overall consumption. At present, the performance of real estate is particularly remarkable this year. The growth rate of steel used for infrastructure construction is increasing, the growth rate of steel used for household appliances and machinery industry will gradually slow down, and the steel used for automobiles will continue to decline.

In addition, for all kinds of products, the consumption of long wood is still strong, and the shipbuilding and automobile industries of plates are declining year on year, which makes the consumption of the whole plate enter a low period. So the price trend in the second half of the year is still likely to be a long strong board weak trend.

IV. the overall inventory is increased but not at a high level

From the perspective of social inventory, compared with the same period of previous years, it is all increased, and the current stage of social inventory plus factory inventory is slightly higher than that of previous years, but it is also accumulated recently. Overall, the total amount is not high, and the consumption of five major varieties is slightly higher than that of previous years.

Compared with the inventory and weekly consumption, the overall market is in a delicate balance, and the overall market is still in a slightly supportive state from June to July. And with the rush into the second half of the year, the overall steel demand is likely to be higher than the first half. Therefore, the overall inventory may fall to the end of the year again after the recent recovery.

V. opinions of steel market in the second half of the year

1. After a wave of "baptism", iron ore has an irresistible momentum. At present, the overall inventory is on the low side. However, after the recovery of the port and some mines, the overall inventory has gradually recovered. At the same time, after the recovery of the profits of the steel plant, the consumption of iron ore is also likely to rise.

2. The possibility of steel production rising sharply year on year is very small. On the one hand, the profit of steel plant is not as good as that of the previous two years, on the other hand, environmental protection is still playing a continuous role, and at the same time, attention should be paid to the impact of Daqing in the 70 years since the founding of the people's Republic of China. Therefore, the overall supply of the whole year will only slightly increase.

3. Downstream demand will still have a differentiated impact on steel prices. Real estate and infrastructure construction will mainly promote the growth of long timber, while the shipbuilding and automobile industries will have a greater impact on the board. Therefore, the overall consumption of the whole year is still strong, strong and weak. What we need to pay attention to is whether the automobile will issue mandatory stimulus policies.

4. For the market itself, capital and inventory are the points that need attention. With the clear trend of the economic situation, the overall capital situation needs to be maintained by policies. In addition, the inventory situation does not need to be too worried. After a few weeks of accumulation, it will enter into a period of shock. At the end of the year, it will continue to decline. The total inventory may be about 13 million tons before the Spring Festival.

5. Generally speaking, the supporting point of steel price in the second half of the year still exists, but in the near end of the year, due to the obvious decrease of demand, the steel price will fall down as a whole, and the long material is still stronger than the plate in terms of varieties.