After the southern region entered the rainy season, steel demand was weak. On the supply side, high profits drive steel production. If there is no sudden external factors, steel in stock prices lack of power.
Recently, some economic data for May were released. Industrial value added grew 6.5 percent year-on-year in the month, unchanged from the previous month. Economic growth is expected to maintain a medium to high speed, but will not rise further for the time being. The cumulative year-on-year growth rate of fixed asset investment fell to 8.60 per cent, compared with 8.9 per cent last month. The cumulative year-on-year growth rate of real estate investment was 8.80, down 0.5 percentage points from the previous month. The decline in investment growth is in line with the direction of economic restructuring, and the growth of terminal steel demand will be suppressed.
The year-on-year growth rate of broad money supply M2 fell to 9.6 per cent in May, a rare low growth rate since 2003. The balance of new RMB loans rose 12.9 per cent year-on-year, unchanged from the previous month. The SHIBOR rate rose slightly, rising to 2.8776 per cent overnight on June 21 and the seven-day lending rate to 2.9429 per cent. The reduction in interbank business has objectively led to a decline in liquidity and has been fully reflected in the recent volatility in commodity prices. The central bank's hedging operations in the open market have smoothed liquidity fluctuations, there is no panic in the financial market, there will be no systemic risk in the short term, and the impact of deleveraging on commodity prices will be prolonged.
Steel demand into the off-season. The growth rate of planned investment in newly started projects in the first five months was -5.60%, up 0.30 percentage points from the previous month. In May, the sales area of commercial housing was 131.6485 million square meters, up 4.31 percent from April; the inventory of commercial housing was 660.18 million square meters, down 2.15 percent from the previous month; the area of housing under construction was 6714.3823 million square meters, up 2.66 percent from the previous month, down slightly; the area of new housing construction was 169.3881 million square meters, up 2.5858 million square meters from the previous month, down significantly; the investment in real estate development was 986.342 billion yuan, up 16.87 percent from the previous month, growth rate decreased significantly. The enthusiasm of real estate companies for new project development is slightly lower than in previous months. Judging from the apparent consumption of steel, the consumption of steel in April was 89.488 million tons, down slightly from 90.504 million tons in March. As of the week of June 16, Shanghai's rebar purchase volume was 32889 tons, down 3461 tons from the previous month. At present, the south has begun to enter the rainy season, construction steel demand will be affected. Intermediate demand, which is heavily influenced by prices and helps to rise and fall, also needs to be taken seriously.
On the supply side, there is an impulse to increase steel production. At present, the profit ratio of domestic steel mills has reached 84.05, and the profit of rebar per ton of steel is nearly 1,000 yuan. Iron and steel production enterprises have a strong impulse to increase production. Blast furnaces were operating at 77.35 per cent in the week ended June 16, up 0.42 per cent month-on-month. As of June 14, the operating rate of rebar manufacturers was 77.40, an increase of 2.6 percentage points from the previous month; the rate of attainment was 71.70, an increase of 0.9 percentage points from the previous month. Judging from our research, some companies that stopped production and withdrew from the market a few years ago have now begun to re-produce. In the current environment, there should be little room for steel supply to decline. From the perspective of environmental protection, the environmental protection equipment of steel production enterprises is basically in place, the output has the potential to increase, and the production cost will rise from 100 yuan to 200 yuan/ton. At present, the market is more concerned about the supply of new electric furnaces, and there are still some uncertainties in the future industrial control policies.
From the steel inventory point of view, is still in a state of decline. As of June 16, the social inventory of rebar in some cities across the country was 3.8035 million tons, down 16900 tons from the previous month; the social inventory of hot rolls was 2.5917 million tons, down 137100 tons from the previous month. As of June 14, steel mills had 2.4824 million tons of rebar in stock, up 6500 tons from the previous month. It should be noted that the rebar inventory in some cities has rebounded slightly, which will put pressure on in stock prices.
