Since this year, the steel market has maintained a semi closed state: on the one hand, the inventory of steel enterprises and social inventory has continuously broken through the historical highs in the same period; On the other hand, the commencement and resumption of the downstream steel industry are generally delayed, and the demand is released slowly. At present, steel mills and steel traders are generally facing greater inventory pressure and capital withdrawal problems due to the simultaneous catalysis of both supply and demand. There is no doubt that the combination of high inventory and weak demand has formed a downward pressure on steel prices.

The declining steel prices are eating up the profits of steel mills and steel traders. The reporter of futures daily learned in the interview that the current steel market is in the off-season, the profit of the black whole industry chain shrinks, and steel enterprises and steel traders generally suffer losses.

Why is the steel market so far? The reporter learned from a number of insiders that under the background of rising global inflation risk, increasing downward pressure on the economy, repeated disturbance of the COVID-19 and the current rainy season, the opening and resumption of work in the downstream steel industry has not been released in a centralized manner, and the demand in many places is still delayed. As the demand recovery rate is not as fast as expected, the risk of steel mills and traders in inventory is still high.

Recently, the social inventory level of rebar has maintained the highest level in the history of the same period. The social inventory of hot coil has again reached the highest level in the history of the same period. The social inventory of the five building materials has also maintained the highest level in the history of the same period. The pressure brought by high inventory can not be ignored.

Will the steel market rise back in the second half of the year?

From the perspective of supply, due to the recent sharp drop in steel prices, domestic steel production enterprises have made significant losses, which has forced steel mills to reduce production through overhaul. However, driven by the policies of maintaining supply and stabilizing prices and stabilizing industrial production, the production rhythm of domestic large and medium-sized steel enterprises is relatively less affected by the "sharp drop" in steel prices. From the perspective of domestic steel output of subdivisional varieties in May, The main production reduction varieties are wire rod and screw thread steel, while the plate varieties show a slight increase. Considering that the domestic economy will gradually recover in the second half of the year, domestic steel producers may advance the production cycle to ensure the subsequent gradual return of steel demand, but the capacity release of short process steel producers will be significantly suppressed.

Second, from the perspective of demand, the steady growth policy has entered the stage of intensive introduction, and then it will accelerate to enter the implementation stage. The domestic economy will support the economic recovery by enhancing the consumption of residents and enterprises and expanding effective investment. However, when the policy implementation cycle meets the traditional off-season demand, the domestic steel market has formed a strong game situation. From the perspective of expectation, the recovery of demand is the general trend, but it needs time to verify; From a practical point of view, the high temperature in the north and the rainy season in the South have obvious characteristics of off-season demand, and the relatively high inventory needs to be digested; Therefore, the demand side of the steel market will be weak in the short term and strong in the long term. The recent "slump" in steel prices will effectively stimulate the enthusiasm of downstream industries to prepare goods, so as to speed up the destocking cycle of high-level inventory.

Third, from the cost perspective, the recent "sharp drop" in steel prices has been associated with a sharp decline in the coke and iron ore markets. The coke market has staged a "jump up and down" market, and the iron ore market has also begun to be under obvious pressure. As of June 20, the Platts iron ore index was 112.4 points, the lowest point since the beginning of this year, down 24.2 points from the beginning of the month, a decline of 17.7%, and the largest monthly decline since this year. Due to the support of the high cost in the early stage, the domestic steel price will rebound after breaking through the cost line. However, the recent obvious downward movement of the production cost line in the steel market may lead to another downward exploration of the steel price in the later stage.

In general, in the near future, the domestic steel market will face the increasing impact of the tide of global interest rate hikes, the slow contraction of high-level supply, the continuous impact of weak demand in the off-season, the falling cost, the soft hard bottom of the steel market, strong steady growth, and the lengthening of the expected landing cycle. In the short term, the domestic steel spot market may show a slight rebound after the "slump", but the obvious downward movement of production costs may force the steel price to fall again.