Production restriction is not relaxed, and the marginal improvement of demand is superimposed, which promotes the continued destocking of inventories

In terms of building materials, Northeast, East China and Northwest China saw little reductions due to equipment overhauls this week, and other regions have increased production to varying degrees. North China and Southwest China have performed more prominently. Among them, North China is due to the slight adjustment of tightness in the implementation of production restrictions and the impact of power cuts in the Southwest. The volume slowed down this week, so the overall supply increased slightly. In terms of hot coils, the proportion of hot coil companies that have resumed production has increased significantly from the previous month, with output rising to 3,271,900 tons. The resumed production areas are concentrated in North and Southwest China, and the reduced production areas are concentrated in Central China.

In terms of building materials, the southern and northern parts of the country dropped a total of 38,000 tons and 56,700 tons, respectively, and a cumulative increase of 23,900 tons in East China. From a regional perspective, South China, North China, and Southwest China are the main reservoir reduction areas. In terms of hot rolls, the southern and northern regions have dropped 6500 tons and 15 thousand tons respectively from the previous month, while eastern China increased slightly by 7 thousand tons from the previous month. On the whole, the current increase in stocks is mainly due to the fact that the resource circulation obstacles in Henan, Jiangsu, Hubei and other provinces have not been completely removed, and the pace of outbound stocks has slowed down, but most of the remaining provinces still maintain a downward trend in stocks.

In terms of building materials, taking rebar as an example, the southern and northern regions decreased by 75,900 tons and 34,900 tons from the previous week, and the East China increased by 17,000 tons from the previous week. Compared with the same period last year, the current North China is 8.93 tons higher than the same period last year, and Eastern China and South China are 46,400 tons and 564,800 tons lower than the same period last year. In terms of hot rolls, East China and North China were down 13,800 tons and 10,600 tons from last week, respectively, and South China increased by 25,000 tons from last week. On the whole, the decline in social inventories this week has expanded compared with last week. In addition to the gradual improvement in rigid demand, it is also due to speculative demand. Some traders took the initiative to start a small amount of inventory.
The total inventory of five major products this week was 21,347,200 tons, a decrease of 232,700 tons from last week. Among them, the inventory of building materials decreased by 166,200 tons, a decrease of 1.2%; the inventory of plates was 66,500 tons, a decrease of 0.9%. The total inventory of the previous period was 21.57 million tons, an increase of 209,800 tons from the previous week. Among them, the building materials inventory increased by 234,400 tons, a decrease of 1.7%; the plate inventory fell 24,600 tons, a decrease of 0.3%.
Comprehensive conclusion]

In terms of supply, the overall supply rebounded slightly this week, with a month-on-month increase of 51,400 tons of long products and an increase of 49,300 tons of plate production. Recalling that the large-scale production reduction is mainly due to the impact of multiple factors such as falling demand, falling steel prices, shrinking profits of steel enterprises, frequent natural disasters and other factors, national policy constraints and production restrictions have been accepted by the market, and local production restrictions and production reduction plans have been implemented successively. Five major types of steel products Reduced to a relatively low level during the year. Approaching mid-August, the impact of favorable factors such as the unrestricted production, the improvement of the demand margin, the management of precipitation disasters, etc., the exploratory rise of steel prices, the substantial recovery of the profit level of steel enterprises, the current blast furnace enterprises’ rebar, hot coil and plate Profits reached 750 yuan/ton, 917 yuan/ton and 1,115 yuan/ton respectively, which in turn stimulated the enthusiasm of steel companies to resume production. But judging from last year’s supply trend, August 2020 was already a high level in the second half of the year, and production was gradually reduced thereafter. Therefore, it is not ruled out that the current supply of the five major varieties has reached the relatively normal level in the second half of the year. The specific increase in production in the later period depends on the implementation of the local area.

On the demand side, from the macro data point of view, the real estate sales department continues to cool down, the real estate regulation has increased the “plugging”, and the production and sales of automobiles and excavators are not satisfactory. All seem to indicate that consumption has not improved. However, judging from the current inventory changes, steel mill inventories and market inventories have decreased simultaneously. Although the magnitude is not large and there is no clear trend of steel consumption, there is a high probability that the trend of improvement in the margin of demand will not change. It can also be seen from the shipment situation of more than 500 domestic concrete companies that more than 70% of the concrete companies’ shipments have recovered, and the demand for construction sites will continue to be released, while the consumption of slabs will be effectively supported mainly by strong exports. Judging from the changes in inventory last year, there has been a significant destocking since the beginning of September. Although inventory increased slightly during the National Day, the downward trend continued until the end of the year after the holiday. Although this year’s policy has imposed a lot of restrictions on production, there is still potential for domestic rigid demand estimates. Therefore, the extent of destocking and consumption in the second half of the year can be expected.

Post time: Aug-25-2021