holdempokerstrategy| China Steel: Steel mills 'profitability increased by 2.16% and interest rate cuts in June are expected to benefit steel prices

Newsletter summary

Fed hawkish signals led to a rise in the dollar and a fall in commodity prices. The output of domestic steel mills increased slightly.HoldempokerstrategyDemand fell, but the landing of real estate policy brought macro support. Port iron ore inventories hit a record high and cost-side support weakened. The new policy of the property market in second-and third-tier cities stimulates demand and is good for steel prices. It is expected that steel prices will fluctuate strongly next week.

Text of news flash

[the stronger US dollar led to a fall in commodity prices, a slight increase in domestic steel mill production, a decline in market turnover but obvious macro policy support]

Recent hawkish statements from the Federal Reserve Bank have led to a strong rise in the dollar index and widespread pressure on commodity markets. At the same time, the output of steel mills in China's domestic steel industry has increased slightly this week, but market demand has declined and market turnover has also decreased. Nevertheless, thanks to the successive implementation of domestic real estate market policies, funds have been injected into related projects, providing solid support for the macro-economy. At present, businessmen in the market generally hold a cautious wait-and-see attitude, and the future trend of steel prices should be closely watched by investors.

[the profitability of steel mills is improved, and the supply and demand of the industry is basically good]

According to the latest data, the profit margin of steel mills increased by 2% month-on-month.Holdempokerstrategy.16%, indicating that the profitability of steel mills has increased. The survey results show that although the traditional steel consumption is off-season in late May, the apparent consumption of the five major steel products has decreased slightly. In spite of this, the production enthusiasm of steel mills has not been affected, the market demand for raw materials is still strong, and the support on the cost side still exists, which is good for the trend of steel prices.

[Port iron ore stocks hit a record high and the market is in ample supply]

Recently, iron ore stocks in 45 ports across the country reached 148.5532 million tons, an increase of 0.33% from the previous month, setting a new high since late April 2022. Although the amount of foreign ore arriving at the port has decreased this week, the port iron ore inventory still shows an upward trend. At the same time, the weakening prices of crude oil, non-ferrous metals and precious metals in the international market, coupled with the strong financial attribute of iron ore, have led to a decline in the expectation of market capital investment and a slight drop in iron ore futures prices. the high operation of iron ore inventory in the spot port has a negative impact on the trend of steel prices from the cost point of view.

[new policies on the property market in second-and third-tier cities have been launched one after another, and the market is expected to improve]

After Wuhan announced the new property market policy, Hefei, Changsha, Xi'an, Jinan and other cities have reported that the down payment ratio and mortgage interest rates have been reduced. Although there has been no action for the time being in first-tier cities such as Beijing, Shanghai, Guangzhou and Shenzhen, banks in places such as Suzhou and Hangzhou may soon follow suit, which is expected to stimulate residents' enthusiasm for buying houses, especially the release of demand for improved housing. In addition, LPR remained unchanged, providing room for interest rate cuts in June, and overall monetary policy expectations were positive, which was good for steel prices.

[spot market performance is strong, building materials prices are rising]

China Iron and Steel Network APP data show that the average price of rebar 20mmHRB400E rose 48 yuan / ton this week, the average price of 4.75 hot-rolled coil also increased, and the average price of Q235B increased 29 yuan / ton compared with the previous month. In addition, Tangshan Qiananpu carbon billet rose 130 yuan / ton from May 16 to 25.

[futures market high volatility, black commodities mixed]

Black commodity prices fluctuated slightly in the night market on the 24th, the main price of rebar fell slightly, and the main hot coil also fell slightly. However, coking coal and coke prices rose slightly, although iron ore prices fell slightly. This week, the black system as a whole showed a strong shock trend, rebar, hot coil, coke and iron ore and other commodities have risen to a certain extent.

[market expectations and policies play a dual role, and steel prices fluctuate strongly]

Considering the current macroeconomic policy and the fundamentals of industrial supply and demand, the steel market is affected by both macro policy and industrial supply and demand. Total steel inventory maintained a downward trend, but apparent demand declined. Taking into account the possible interest rate cuts in June and the positive expectations of monetary policy, steel prices are expected to run mainly in shock next week, with an overall fluctuation range of 20-40 yuan / ton. Investors and market participants should pay close attention to the changes in relevant data and make reasonable decisions.