Since August, the price of RB 2010 contract is 3750-3900 Yuan/ton. At present, the probability of rebar output reduction is very large, and with the gradual arrival of the peak season, the demand of rebar are boosted. However, high inventories and the difference of low base will still limit rebar futures price.
Spot up lack of momentum
In August, rebar demand declines month-on-month , and spot trend is weaker. As of August 24, the national average price of rebar HRB400 was 3,833 Yuan/ton, and is lower 1Yuan/ton than the beginning of August. Rebar 2010 contract rise 4 Yuan/ton since the beginning of August. Since June, rebar base has been shrinking all the way, and at the end of July it appears to be inverted. According to the calculation of Shanghai spot price of rebar, the discount on the spot of RB 2010 contract is 24 Yuan/ton on August 24, which is far lower than the high base difference of 300 yuan/ton above in the past two years.
Since the reform of the supply, the price of rebar spot water is higher than market price sharply, but this year, the futures trend is stronger. Since the beginning of August, the 2101 contract has risen more, and duiring session, the price rise 2010 contractfor a time on August 20. The reason basically is that the pressure of spot stock is bigger. In the week ended Aug. 21, 35 cities’ rebar inventories stood at 8,662,000 tons, up 82,200 tons month-on-month and 37.2% from the same period last year. Although the burst of terminal demand in April and May caused a large inventory reduction, the inventory higher than previous years still occupied a large amount of funds of upstream and downstream enterprises, and the pressure of inventory continued to increase on the spot price.
The probability of production reduction is very high
According to incomplete statistics, from late August to early September, more steel mills were overhauling across the country, with an increase of about 30,000 tons of rolling line overhauling per day, mainly in construction steel production lines. In addition, with the widening of the spot price difference between hot rolled coil and rebar, large steel mills have the momentum to convert molten iron from the thread rolling line to plate production. Reviewing the price difference and yield changes, when the profit difference between sheet and long material exceeds 200 Yuan/ton and lasts for more than 3 weeks, steel mills will start to transfer molten iron originally used for long material rolling line to sheet metal production line. Since July 30, the price difference of rebar rin Shanghai has been above 200 Yuan/ton and has been kept above 200 Yuan/ton for 3 weeks. So large mills have a strong incentive to move molten iron from their relatively low-margin thread production lines to their hot-coil production lines. In late August, the increase in maintenance of steel plants, and superimposed molten iron changes the line of production, so rebar output may reduce.
Terminal capital liquidity is tight
Since July, the demand of rebar terminal has declined month-on-month. As of August 21, the average daily turnover of building materials in July and August was 218,100 tons, compared with the second quarter, there is a decrease of 12,300 tons or 5.3% . On the one hand, the demand decline is due to the continuous rainfall in many parts of the country from July to now. On the other hand, the terminal enterprises in the second quarter after the crashing, there is a tight capital, and the overall strength of starting work declines. From the high-frequency data, last week building materials demand continued to fall quarter on quarter, and in northern demand has not recovered. Meanwhile, the high temperature continues in east China and South China, and there is a large area of rainfall in the eastern coastal areas. Typhoon “Bawei” continues to move northward, which has a great impact on coastal shipping and demand in the short term. Therefore, the demand growth space of rebar steel is limited.
Medium-term rebar price will depend on the peak season demand of construction industry in the September. Data from the National Bureau of Statistics showed that the cumulative investment in infrastructure construction in January-July was 1.19% higher than that in January-June, up 1.26 percentage points. From January to July, the total area of new construction fell by 4.5% year on year, down 3.1 percentage points in January-June. In order to make up for the project gap in February and March, terminal work will continue throughout the year, it is expected that the demand for rebar will have a bright performance in “gold nine silver ten”.
In short, the current supply and demand of rebar is both weak: the supply end is expected to increase the maintenance of steel mills and the production of molten iron; the demand end is subject to the weather factors and capital shortage, and the terminal starting is still low. But near the “gold nine silver ten”, so peak season demand can be expected, there is an upward momentum in the middle rebar. However, the main contract is subject to the low base and high inventory, and it is hard to get out of the trend market in the short period.
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