Policy macro guidance, weak off-season demand, the end of the dilemma

1. Combing the recent policy timeline

5.12 day commodities rose too fast, cause the policy regulation, National Development and Reform Commission (NDRC) is introduced, from the future, the international commodity price conduction effect and low base factors such as compared to the same period last year, producer price index rose in recent months may also further expand, but as the price signals for raw materials production flow guide continues to release,Commodity prices will gradually return to the fundamentals of supply and demand.It is expected that the annual PPI year-on-year increase will be "low at both ends and high in the middle", and the year-on-year increase will fall in the second half of the year.

On May 14, ministries from Tangshan and Shanghai met with local steelmakers and steelmakers, following a May 13 call by China's Standing Committee for an effective response to the rapid rise in commodity prices.Enterprises are required to actively fulfill their social responsibilities, effectively strengthen price management, reasonably set prices, and cooperate with the government to stabilize prices in the steel market.Provide high quality and reasonable price steel for downstream enterprises.

On May 18, the policy side continued to sound that the National Development and Reform Commission will jointly investigate the market conditions of steel and iron ore to maintain market stability.In view of the new situation and new problems in the field of bulk commodities recently, the National Development and Reform Commission, together with relevant departments, has introduced the adjustment and improvement of steel import and export related policies, and strengthened the supervision of the futures market.At present, the National Development and Reform Commission and the State Administration of Market Regulation are jointly investigating the market situation of steel and iron ore. In the next step, we will continue to work with relevant departments to strengthen monitoring and early warning, strengthen market supervision and take targeted measures to effectively maintain market stability.

On May 19, the State Council, China's cabinet, pledged to strengthen market supervision.Give play to the role of trade associations and strengthen self-discipline.We will strengthen interconnected oversight of the futures and spot markets and take targeted measures at an appropriate time to detect abnormal trading and malicious speculation.Conduct of monopoly agreements, spreading false information, price gouging, especially hoarding, and other activities shall be severely investigated and publicly exposed in accordance with the law

On May 27, China Iron and Steel Association issued a proposal for the steel industry to build a stable and orderly market order to promote the industry's high-quality development. First, organize production according to demand to maintain the balance between supply and demand;Second, adjust the export strategy to ensure domestic supply;Third, play a leading role, strengthen regional self-discipline;Fourth, deepen industrial chain cooperation for mutual benefit and win-win results;Fifth, resist vicious competition and promote orderly development;Sixth, strengthen market monitoring and issue early warnings in a timely manner;Seventh, we should assist market supervision and strictly guard against malicious speculation.

Interpretation: in the early stage of the carbon neutrality push, the country is open to commodity prices, hoping to transfer foreign input inflation through the rise of steel prices.Especially after May 1, the crazy rise of the black line is out of control.Policy is turning to, by encouraging start to suppress prices, by late cancel the export tax rebate, the appreciation of the renminbi would not rule out further increase export tariffs, to reduce the input of inflation in front of us, have done, talk about a cisa today in suzhou, can explain the blind chase after go up no, wantonly kill cheapen also not line, macro policy no longer overall bearish,At present, prices also gradually to stabilize the return to fundamentals.

2. The fundamentals

According to the east China building materials of exclusive statistics turnover, a turnover of early days is in a state of basic normality, turnover peak is 5.10 days, integral east China holds water quantity reached 152,200 tons, after this time point, clinch a deal basically in 100 thousand, yesterday east China turnover reached the nadir since a few months 584 thousand tons,The overall demand is weak, the release is not good, and the market turnover deviation caused by the weak mentality.

3. Steel mill profits

Recent prices have been continuously reduced, although scrap steel and other resources to reduce the cost of steel mills, but the overall profit margin is still narrowing, the market decline gradually narrowed, the possibility of a short-term market crash is not likely, steel mills are expected to gradually stabilize.

4. Aftermarket forecast

Xiaobian personal point of view: the period of the spiral reduction warehouse rise, the short-term trend is still repeated, but the space to fall or not much, support the market mentality;Spot weakness, cautious downstream operation, the overall volume of light, substantial lack of positive, the end of the month price is easy to fall difficult to rise;The latest data show that the effect of the off-season continues to deepen, this week five major varieties of steel production weekly month-on-month slightly down, but the steel mill inventory accelerated recovery, social inventory to maintain a decline, the rate of decline continues to slow down, weekly apparent demand significantly reduced.Recently, heavy rainfall has been sustained in areas south of the Yangtze River, especially in parts of Guizhou, Hunan, Jiangxi, Fujian and Guangdong, which may impede local demand.Overall expected short-term concussion consolidation.