Domestic Steel Price or Stop Drop: 9 Weeks Upward Trend at the End of Inventory

According to the latest report of "West Ben Shinkansen" by the iron and steel information agency, in the week of August 16, the price of building materials in most parts of the country fluctuated downward. Affected by the slump in demand, business pessimism intensified, and some distributors cash at low prices. At the same time, the strength of cost support weakened, eventually leading to spot price callback.

Take the Shanghai threaded steel market as an example, the price first restrained and then rose, and the overall price was mainly volatile consolidation. As of August 16, the Western Index was 3960, down 60% from last weekend. In the same period, the representative specifications of Shanghai high-quality third-grade threaded steel were 3690 CNY/ton, up 30 CNY/ton from last weekend, while Shanghai high-quality steel was 30 CNY/ton higher than last weekend. The price of snail on behalf of specifications is 3990 CNY/ton, which is 10 CNY/ton higher than last weekend. It is worth noting that in the week of August 16, the domestic steel social inventory ended the nine-week continuous upward trend. The main reasons are the intensification of the contradiction between supply and demand in the earlier period, the expansion of the scope of production restriction and reduction in steel mills, and the reduction of supply. It is understood that this inventory decline is due to the rapid decline of steel prices in the early stage, the increase of losses in short-process steelmakers, and small losses in some long-process steelmakers, which stimulates the joint reduction of production and price guarantee in many steelmakers, thus slowing down the pace of capacity release. The report argues that as long as this momentum continues, there will be inflection points in inventory, which will boost market confidence. However, at present, terminal demand has not fully recovered, the speed of de-inventory is lower than expected, and there is still no incentive for prices to enter the upward channel. From the point of view of raw materials, in the week of August 16, domestic raw material prices rose and fell, including billet, iron concentrate powder and scrap steel, which all declined to a certain extent, while coke increased significantly.

Influenced by the sharp drop in import prices, the price advantage of domestic mines is not obvious, and steel enterprises intend to lower prices. After the typhoon, the capacity of the main ports in East China was restored, which led to a significant decline in port inventory this week. In addition, the market panic eased after a sharp drop in mining prices in the previous week. The report concludes that, on the whole, although the market sentiment of price drops has slowed down, the demand will also decrease with the increase of steel mill capacity limitation. It is expected that the price of iron ore will be dominated by narrow fluctuations in the week of August 19.

In summary, the report considers that the short-term market is expected to be dominated by strong shocks, taking into account the increased release of demand in late August. Based on this, the market next week is relatively optimistic evaluation, specifically, the Western Steel Index will run in the range of 3930-4020 yuan next week.