Machinery / Industrial Parts & Tools

For those who work in the steel industry, May may become a period of time that will never be forgotten. In the first half of May, the price of steel was like a broken bamboo, and the price soared; but in the second half, the price of steel plummeted like a roller coaster.

“You’re soaring, people can’t afford it; if you’re soaring, everyone’s'buying up, not buying down' and not buying.” A raw steel trader sighed to the Red Star Capital Bureau. Sales in May dropped by about 40% year-on-year. about.

A person who tracks black futures has analyzed to the Red Star Capital Bureau that in this round of price fluctuations, it is suspected that there is a combination of social funds and companies in stock for speculation. The Red Star Capital Bureau noticed that after the steel market ushered in a skyrocketing market, the State Council "swords" commodities three times within half a month, and the five departments interviewed key companies in related industries, and then the steel prices quickly dropped and adjusted.

So, what are the underlying reasons behind the sharp rise and fall of steel? What impact did price fluctuations have on the industry?

January-May steel price "roller coaster" market

It rose more than 1,000 yuan in 12 days and fell nearly 2,000 yuan in late May

After the Spring Festival, the prices of a number of steel products have risen to varying degrees, especially around May Day, the domestic steel market ushered in a round of skyrocketing prices, once breaking through historical highs.

Public information shows: Finished steel is mainly divided into building materials (rebar, wire, etc.), plates (hot-rolled coils, medium and heavy plates, etc.), pipes (welded pipes, seamless pipes, etc.), and profiles (angular grooves, H-shaped steel, etc.) And other different categories.

Take the rebar (HRB400-20MM, Beijing) that is often used in the construction field as an example. On April 30, its price was 5220 yuan/ton; by May 11, its price had risen to 6,350 yuan/ton. In other words, in just 12 days, the rebar has risen by 1130 yuan/ton.

“Actually, it has been rising since the Spring Festival this year, but it started to rise particularly sharply at the end of April.” The person in charge of a company that mainly produces rebar expressed emotion to the Red Star Capital Bureau.

From the perspective of hot-rolled coils (3mm hot-rolled, Wuhan), on April 30, its price was 5,910 yuan/ton; nearly half a month later, on May 12, its price rose to its highest point recently. Reached 6900 yuan/ton.

In fact, it is not just these two types of steel. According to CCTV Finance, as of mid-May, the average price per ton of steel for the eight major varieties in the national steel market has exceeded 6,600 yuan, an increase of 75% year-on-year.

"It's going up too much." During the interview with the Red Star Capital Bureau, similar remarks were most often said by steel traders. Several steel traders told the Red Star Capital Bureau that most of the spot steel prices were adjusted in accordance with the futures prices. In the past, the spot price was basically adjusted once a day, but in this May, there were adjustments two, three, or even four times a day.

For May, when prices were like a roller coaster ride, a steel retailer told Red Star Capital Bureau, “The retail price of some products has risen from 5,000 yuan/ton to 7,000 yuan/ton, and then fell again, and now it’s back to 5,000 yuan. /Ton".

"I have never encountered such a situation before. It is adjusted every day. This may be because the price fluctuations have been relatively large this year. Anyway, we are following upstream manufacturers." A steel trader told the Red Star Capital Bureau.

2/Customers buy up and not buy down

Sales fell by 40% year-on-year, with fewer trucks

On May 28, the Red Star Capital Bureau visited Liangli Steel City in Chengdu. Large trucks entered and exited. Workers wearing safety helmets were busy in the yard, loading or unloading goods. A security guard who has worked here for more than 10 years told the Red Star Capital Bureau that he summed up his years of experience, “There are more steel price-increasing cars, and less price-cutting cars. It’s all like this. Now (that day) is not as much as before. No need to line up."

According to the latest statistics of Zhongtai Securities, the price of rebar and hot-rolled coil mentioned above has dropped to RMB 5,450/ton on May 21, and RMB 5,800/ton for the latter, which has been adjusted back. To the level around April 30. In addition, the average price per ton of various steel products such as cold rolled coils and medium and heavy plates fell below 6,000 yuan.

Liu Ping (a pseudonym) is a raw steel trader. His company is in the middle of the industrial chain. The products (raw steel) are mainly sold to processing plants. Compared with last May, the company's sales have dropped by about 40%. It is not just Liu Ping’s sales that have been affected. The Red Star Capital Bureau looked through the steel industry database of Zhongtai Securities and found that in the 19th week (05.10-05.16), the national construction steel transaction volume suddenly dropped to 218,500 tons, a drop of 26.31 from the previous month. %.

The Red Star Capital Bureau was informed that "buy the ups and not the downs" is a recognized principle in the industry. However, in this round of price changes, the previous increase was too large for many people to start; and when the price fell, the industry was watching to see if the price would continue to fall.

"'Buy the rise, not buy the fall'. This'up' means a steady rise. You have risen more than the cost of others. Why do others buy it? This business will not be closed." Zhang Wei told Red Star Capital Bureau . "If you go up so much, people can't afford it; if you go down, everyone is'buying up and not buying down', and they don't buy." Liu Ping said that only some processing factories were forced to buy soaring in order to catch orders. Raw materials.

3/ Why did the price of steel go up and down?

Demand is booming and new highs, the industry claims that some people are "roasting"

Li Kun (pseudonym) works for a futures company, and he has been tracking black futures for a long time. Regarding the skyrocketing market that ushered in May, Li Kun believes that, on the one hand, the domestic control of the epidemic is relatively good, and after the resumption of work and production, the demand for steel is strong; on the other hand, the global liquidity is loose, which has also led to the increase in steel. The price was pushed up.

According to data from the National Bureau of Statistics, in the first quarter, national infrastructure investment increased by 29.7% year-on-year and 4.7% year-on-year. According to Mysteel's incomplete statistics, 19,654 projects were started across the country in March, with a total investment of 12.55 trillion yuan, an increase of 92% from the previous month.

The national construction steel transaction data shows that from 16-18 weeks (04.19-05.09), the national construction steel transaction volume was 270,300 tons, 244,900 tons and 296,500 tons, which were higher than the data of the same period in the past five years. Among them, the volume of the 18th week hit a new high from 2016 to date.

In addition to the above two reasons, Li Kun revealed to the Red Star Capital Bureau that in the context of insufficient supply and strong demand, "someone is roasting the stock." Li Kun learned from his colleagues that some speculators used their capital advantages to unite existing companies and took the opportunity to speculate in the context of "carbon peak and carbon neutrality" in the industry.

"For example, if there is less rebar (in the market), we will do more to push the short position, and the goods in the warehouse will not be released, nor will we make a warehouse receipt. We will continue to fight the short position until the short position is closed. Until it falls." Li Kun said. (Note: Li Kun stated that the situation is long and short, which generally means that the bulls create a situation of serious shortage by collecting the spot, so as to push up the price, forcing the short to close the position at a high price or purchase the spot at a high price to complete the delivery. It is an illegal act to manipulate the futures market.)

Li Kun is not the only person in the industry who holds the above-mentioned view. Another steel trader, Zhang Wei (a pseudonym), also told the Red Star Capital Bureau that some people have been speculating stock recently.

The Red Star Capital Bureau noted that following the surge in the steel market, on May 12th, 19th, and 26th, the State Council "swords" bulk commodities three times within half a month, and proposed that both the two-way adjustment of supply and demand should be strengthened, as well as Investigate abnormal transactions and malicious hype. In addition, the National Development and Reform Commission and other five departments jointly interviewed key enterprises in steel and other industries on May 23, and pointed out: the current round of price increases is the result of a combination of many factors, including international transmission factors, but also many aspects reflect the existence Excessive speculation.

After the State Council’s three naming sessions and multi-departmental interviews, starting from May 12, the price of steel quickly dropped and adjusted. In week 19 (05.10-05.16), the national construction steel transaction volume also suddenly dropped to 218,500 tons.

4/Light inventory operation model

Cost pressure may be transmitted downstream, and prices have risen one after another

A number of salespersons from steel companies told the Red Star Capital Bureau that, generally speaking, the decision of whether to stock up or not lies with the company. If the company is optimistic about the market outlook, it will choose to stock up, otherwise, it will not stock up.

"We now have very little inventory, and the market is too unstable. If an order comes, we will buy as much raw material as we need." A salesperson told Red Star Capital Bureau, so that we don't have to bear the risk of price fluctuations.

Li Kun analyzed the Red Star Capital Bureau and said that although some people are roasting stocks, after removing this factor, there is a real demand for steel in the market.

Under such circumstances, the cost may be being transmitted downstream. The Red Star Capital Bureau found that construction machinery products, especially hoisting machinery and station machinery with steel as the main raw material, have started a price increase mode. According to the product price adjustment notification letters issued by various companies, Zoomlion and XCMG will implement the delivery of the full range of tower cranes and elevators from May 17 and June 1, respectively, and increase the price by 1,000 according to the net weight of the product. Yuan / ton. The price of Shandong Lingong loader is increased by 8000-20000 yuan/unit according to different systems.

In addition to machinery, industries such as real estate, home appliances, automobiles, and casting are all downstream of the steel industry. Take the foundry industry as an example. According to the 21st Century Business Herald, in mid-May, Nanping Municipal and County Foundry Industry Association and Wenzhou Longwan District Foundry Association successively issued price adjustment notices to adjust the price of (steel-related) castings by 1,000 respectively. -1200 yuan/ton, 1500 yuan/ton.

5/Supervise multiple parties to squeeze bubbles

China Steel Association: It is difficult for steel prices to continue to rise sharply

In addition to the State Council’s three naming and multi-department interviews, the competent authorities, industry associations and relevant departments of various provinces and cities are also taking action.

On May 14, Tangshan City Market Supervision and Administration Bureau and other departments jointly interviewed steel production enterprises in the city, demanding that all enterprises should not collude with each other, fabricate or spread price increase information, and should consciously maintain the order of steel market prices and public interests.

On May 24, the China Iron and Steel Association (hereinafter referred to as "China Iron and Steel Association") issued a document on its official public account stating that from the demand side, due to the rapid and large increase in steel prices since April, the downstream steel industry It is difficult to withstand the continuous high consolidation of steel prices, and it is difficult for steel prices to continue to rise sharply in the later period. Two days later, the China Iron and Steel Association issued the "Self-discipline Agreement for the Iron and Steel Industry", which mentioned that during the period of price increases, steel companies must oppose price hikes that are much higher than costs, and during price declines, they oppose dumping of prices below cost.

In fact, supervision is not only aimed at steel companies. According to the situation disclosed by Li Kun to the Red Star Capital Bureau, if anyone really speculates on steel, it is done through cooperation with companies that have stocks and then operations in the futures market. On May 28, the CSRC spokesperson Gao Li said that in response to the recent large commodity price fluctuations, the CSRC resolutely investigates and punishes various violations of laws and regulations in the futures market and maintains the normal trading order of the market.

After a series of combination punches, Pacific Securities once stated in a research report that the current market has a strong bearish atmosphere. Under the traditional thinking mode of buying up and not buying down, delays in downstream procurement and reduced speculative demand will amplify the weakening of demand and increase Price fall pressure.