Steel inventory decline narrowed, black products plummeted across the board

With seasonal decline in demand, weak winter reserves, and a slowing down of steel inventory, the black series futures will have a bleak start in the last week of 2021. Last Friday (24th) night trading hours, black products collectively dived, and the decline further expanded on the 27th.

With the recent market expectation of steel mills to resume production, coupled with the seasonal decline in terminal demand, the margin of supply and demand in the domestic steel market has weakened, and the rebound in steel prices may come to an end.

Looking back on the steel price trend during the year, the domestic crude steel output “equal control” policy has become one of the important factors affecting steel prices. Under the policy guidance, according to data from the National Bureau of Statistics, from January to November 2021, my country’s cumulative crude steel output was 94.359 million tons, a year-on-year decrease of 2.6%.

On the one hand, this means that the work of reducing crude steel production has achieved remarkable results, and on the other hand, it also makes investors’ expectations for the resumption of production of steel mills in the later period continue to increase. Affected by this boost, the prices of coking coal, coke, and iron ore all rebounded to varying degrees, and iron ore returned to above 700 yuan/ton in the second half of last week.

On December 22, Hebei Tianzhu Iron and Steel Group Co., Ltd. relocation and reconstruction project No. 2 1780m³ blast furnace was officially opened. As of the week of December 24, the statistics of imported iron ore inventory at 45 ports across the country was 15.512 million tons, a month-on-month drop of 1.837 million tons, the first drop since October 2021.

Huatai Futures analysis said that as the end of the year is approaching, the crude steel output in December is expected to continue to decline by more than 20% year on year, so the country will successfully complete the annual crude steel reduction task by the end of December. From the end of December to January, various provinces will resume production to varying degrees after completing the reduction. In the later stage, the focus will be on the destocking of inventory and the cost support of raw materials.

However, the weakening of demand for finished products in the off-season has become a reality that the steel market has to face. This year, while the crude steel output leveling control policy is in force, domestic steel inventories continue to be destocked, driven by the good resilience of terminal demand, which has also given strong support to the market.

However, in recent weeks, the pace of destocking in the domestic steel market is gradually slowing down, and the market’s expectations for the turning point of steel stocks in January have also begun to rise. According to the data released by the steel and silver e-commerce company in the morning on the 27th, in the week ending December 27, the country’s urban steel stocks were only reduced by 140,000 tons from the previous week, which was significantly narrower than the 386,800 tons in the previous week.

According to the data released last week, as of December 23, the total domestic thread inventory decreased by 336,000 tons from the previous month. Not only did the total inventory decline significantly narrower than the previous two weeks, but the social inventory decline was the first time in nearly ten weeks. To less than 200,000 tons. It can be seen that with the seasonal drop in steel demand, it is becoming more and more difficult for inventories to fall further. However, steel prices lacking destocking support will inevitably return to a weak position.

In addition, for winter storage, which the market generally hopes, according to earlier reports, although a new round of “winter storage” has quietly started in late December, steel traders are hoarding stocks due to the high steel prices and the cautious mindset of traders. The enthusiasm is not high, and the market predicts that reserves this winter may be weaker than last year. In the later stage, the market will still be in a game of strong expectations and weak reality. The “winter storage” may be postponed in January, when it will be possible to usher in a turning point in steel social stocks.

On the whole, the rigid demand is not enough and the supply is increasing. Under such fundamentals, it is reasonable for the steel price to fall at the end of the year, and it will also cause a drag on the upstream raw materials and fuels. As of the close on the morning of the 27th, the four major types of black products had the largest declines: coke, hot coils, and threads all fell by about 4% or more, and coking coal and iron ore fell by 3.26% and 1.84%, respectively. (Source: Xinhua Finance)