Steel Prices Will Continue To Shock Due To Multiple Factors

Recently, the steel market, multiple factors superimposed, busy season, coal shortage, freight regulations, etc., market chaos, so that many investors feel at a loss. At present, 7-8 months to reduce steel stock goes not well,  is still one of the major market contradictions. Especially in the steel plant is still at a high level of production, there is no significant reduction in the case, the supply side of the steady stream of pressure, if this part of the inventory can not be effectively reduced in October, the market confidence will be hit again. Overall, the fourth quarter rebar steel prices in the 2100-2400 yuan / ton fluctuations in the probability of larger.
Macroeconomic environment tight
Although the Fed meeting in September decided to postpone the rate hike, and lowered the interest rate target in 2017, but the market believes that Yelen said, “the probability of higher interest rates in December,” is not a bluff, follow-up US economic fundamentals The performance is still the root of all problems. The recent domestic funds also continued tight, the central bank to tighten short-term capital investment, control the risk of bond market, the Shanghai overnight funds lending rate sharply higher.
End demand or continue to weaken
Liquidity tightening will suppress the formation of asset prices. But the terminal needs of steel is also not optimistic. Although real estate sales are still very hot, 1-8 months of the national real estate sales growth of 19.8% growth rate from January to July to expand 1.1 percentage points, and the real estate boom has been transferred to some hot 2.5 and 3 line cities. But in sharp contrast, the real estate new construction is still in rapid decline in growth, new construction area in January-August growth of 12.2% growth rate down 1.5 percentage points from January to July, the conversion of new construction area growth has been the month To 3.26%. At the same time, land acquisition area has been considered a pioneer in new targets, 7,8 months, land acquisition area also re-expansion, mainly because a second-tier cities, land supply is limited, and 234 cities line inventory pressure is still large, Still in the doldrums. Infrastructure, 7-8 months of infrastructure investment growth than in the first half of a significant decline in the local financial constraints, deficit expansion constraints, the follow-up infrastructure investment to increase the difficulty of increasing the difficulty of offsetting the impact of new real estate downside.
The cost of lifting steel plant profits
In the “276 days” policy under the influence of this year, coking coal production dropped significantly more than 10%, leading to coking coal, coke prices rose rapidly, rapidly raising the cost of steel. In the context of the current downturn in demand, the transport costs can not be passed on to downstream users, no doubt increased the burden on steel mills. The current research shows that tons of steel transport costs generally up 30-50 yuan. Sluggish demand, rising coal prices and transportation costs of the three mountains together to squeeze the profits of steel mills, the current production of steel and wire rod steel mill has been a small loss, while the hot-rolled coil profit fell to 200 yuan / ton .
Shrinking profit margins will put pressure on steel mills’ capacity utilization. Compared to the fourth quarter of last year, this year significantly improved the cash flow of steel mills, steel mills will not easily outbreak of large-scale concentration of production, more likely to occur is that demand continues to weaken, steel prices continue to lower production. Supply is passive to follow the demand, it is difficult to form an effective support for steel prices. Correspondingly, the cost of coal-coke prices to improve the center of gravity may be more effective.