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At the beginning of the new year, various data and information have emerged, resulting in the coexistence of long and short factors in the steel market, and the market outlook is entangled between rising and not rising.
First, the disguised interest rate increase has a double impact on the steel market
Before and after the Spring Festival this year, the People's Bank of China “increased interest rates in disguise” and raised the medium-term loan convenience (MLF) interest rate and the standing loan interest rate (SLF) by 10 basis points. Langke Steel Chen Kexin believes that the central bank’s move undoubtedly shows that the loose monetary policy tends to end, which makes the capital easing environment no longer. But from another perspective, it also shows that the decision-making level is optimistic about the prospect of China's economic stabilization. According to statistics, in January 2017, the production and sales volume of heavy trucks nationwide was 81,800 and 83,000, respectively, an increase of 87.6% and 125%. Some opinions compare its indicators to the "barometer" of the Chinese economy, the "wind vane" of macroeconomic policies, and the "thermometer" of people's lives. Langke Steel Chen Kexin believes that this indicator is a good start, and the warmth of PMI, foreign trade, price index, etc., all indicate that China's economic growth rate can achieve the target in the new year, and steel demand will not decrease. This is tantamount to a "reassuring" that has stimulated the market activity of the steel industry chain.
Second, the contradictory mentality of the relevant ministries and commissions on steel prices
In 2016, the national steel prices rose by a large margin. At the beginning of the new year, the steel market continued to perform upward market, and it is estimated that the general increase in steel prices so far has reached or close to 10%. To this end, the relevant ministries and commissions issued a notice requesting to promote the balanced operation of the steel market. From the above notice, we can see the contradictory mentality of the competent authorities: on the one hand, it is believed that under the efforts of many parties, the steel prices have recovered, and the production and sales of steel enterprises have improved. At the same time, the spot price of steel products has been adjusted. Futures market prices rose faster in the short term. Is steel prices now recovering in the end, or is it faster than the rapid rise in fundamentals? It is bound to trigger completely different regulatory measures. Now it seems that the competent authorities are uncertain: not only the price rise, but also the steel industry chain can increase profits, the government departments increase taxes, stimulate investment, increase industrial growth, reduce economic downward pressure, and increase political achievements; Too big to lose control. The competent authorities are undecided about the market outlook of steel products, and the control measures are hesitant, which in turn aggravates the entanglement of the steel market's rise and fall, and also expands the market's long-short operation differences.
Third, the inventory increased "double-edged sword" cold flashing
Since the “buy up and not buy” market rules have driven, and market risk appetite has changed, along with the continuous rise in prices, the national steel social inventories have also increased significantly this year. Lange Steel Chen Kexin believes that for the steel market, the significant increase in steel social stocks is also a "double-edged sword." On the one hand, steel inventories have increased significantly, especially for a large number of enterprises to actively replenish stocks, showing that market participants have increased confidence in all aspects, and the stock reservoirs have been converted from water to absorption, and the relationship between supply and demand has been further improved, driving steel further. On the other hand, with the gradual increase in steel inventories, the market pressure on the market has also increased. After reaching a critical point, just a "black swan" will cause a large amount of stock steel to flock to the market, causing the price of steel to plummet, that is, the so-called "roller coaster" market re-interpretation. Such a cold-smooth inventory of "double-edged swords" is high above the top of market participants. Do you say that steel prices will not rise in the future?
Fourth, the international market loves and hates Chinese steel
In recent years, China's steel exports have continued to increase substantially. In 2016, exports finally jumped to the 100 million-ton mark, which became an important factor in the recovery of China's steel prices. China’s steel exports have increased significantly, triggering trade protection measures for various countries. Affected by this, China's steel exports have dropped significantly. According to customs statistics, the national steel export volume in January 2017 was 7.42 million tons, down 23.2% year-on-year, the lowest in nearly 30 months. Despite the rise of trade protectionism, global manufacturing has started well, and major countries and regions in the world have raised their economic growth. The EU has raised its economic forecast for three consecutive times. The latest report predicts that the EU (28 member states) will grow at a rate of 1.8% in 2017, while the forecasts for the fall and winter reports last year were 1.5% and 1.6% respectively. At the same time, the International Monetary Fund is optimistic about US economic growth, arguing that the Trump administration's infrastructure investment will stimulate US economic growth and have a positive impact on the global economy. To this end, the IMF predicts that the global economic growth rate in 2017 will be 3.4%, which is 3.1% higher than 2016 and will increase to 3.6% in 2018. Langke Steel Chen Kexin believes that as long as the global economy continues to recover, the international market demand for Chinese steel will continue to exist; as long as no other country can completely replace the low-priced Chinese steel, China's steel exports will continue to be larger in 2017. It is also worth noting that while the direct export of steel products has declined, the indirect export of steel products has increased significantly. Customs statistics show that in January this year, the country's exports of mechanical and electrical products increased by 16.6% year-on-year, accounting for 56.1%, an increase of 0.4 percentage points, of which ship and automobile exports increased by 76.5% and 67.9% respectively. This will create a bearish hedge against direct export deceleration.
V. Combating the “land steel” to produce major variables in the steel market
Langke Steel Chen Kexin believes that, indeed, steel to capacity, banned "strip steel" has become a major theme of market bulls to push up steel prices, but if the implementation effect is not obvious, it will have a big impact on the market, become a bear price means. For example, despite the high-profile steel production capacity in 2016, there are investigation reports showing that in 2016, China's effective steel production capacity has not decreased, but a net increase of 36.59 million tons, which has increased the national crude steel and steel output in 2016. Decrease, the annual growth rate reached 1.2% and 2.3% respectively. It is expected that China's steel production capacity will be intensified in 2017, especially in combating “strip steel”. Now the market is rumored to have a big policy of managing smog: steel production in 28 cities in the winter heating season is reduced by 50%. Please note that this is a halving of production, not a capacity cut that is unclear. At the same time, the above-mentioned five ministries and commissions also proposed to severely crack down on “strip steel” and strictly prohibit the provision of credit to relevant production and marketing enterprises. Langke Steel Chen Kexin believes that if these measures are implemented and achieved remarkable results, steel prices will inevitably rise due to further improvement in supply and demand and cost, and at least relatively stable. Otherwise, it will be a high diving due to a large number of backward production capacity. This makes the steel market outlook a lot of uncertainty, resulting in significant changes in steel prices and non-growth.
In summary, the recent steel market profits and short-term factors coexist, but overall, the improvement of supply and demand, increased costs and increased market confidence will become the market leading factor. Chen Kexin believes that the average price of steel in 2017 will be higher than the 2016 level due to its influence. Of course, the steel market will also fluctuate greatly in the new year, and the “roller coaster” market will continue to be interpreted.