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Rework of construction sites around the world Rebar prices remain strong in the short term

Date: 2019-03-11
Views: 3

 Article source: China Steel Price Network


Since late February, steel futures prices have shown a unilateral upward trend. Last week's rebar 1905 contract fell 1.30% to 3,723 yuan / ton. The Hot Roll 1905 contract fell 2.95% to 3,712 yuan / ton. In terms of rebar spot, compared with the previous week, Shanghai fell to 3,850 yuan / ton, Guangzhou fell to 4,220 yuan / ton, Beijing fell to 3,810 yuan / ton. In terms of hot coil spot, Shanghai fell to 3,830 yuan / ton, Tianjin fell to 3,810 yuan / ton, Guangzhou fell to 3,860 yuan / ton.


Short-term demand is still acceptable


Regarding the demand side of rebar, it is considered from the short-term and medium-term perspectives. Short-term rebar demand is mainly determined by the need for return to work after the Spring Festival and the pace of return to work. The new construction of real estate began to rebound from the fourth quarter of last year. As of December 2018, the growth rate of new real estate construction area has remained above 15%. Under normal circumstances, the peak period of steel use is three to six months after the construction of the building. Therefore, this will provide a certain degree of support for steel demand after the Spring Festival. The main factor affecting the pace of return to work this year is the weather. After the year, there was continuous rainfall in most parts of the south and south of China, affecting some of the demand. However, the temperature in North China and Northwest China this year is higher than in previous years, which is conducive to the construction of construction sites in the above areas in advance. From a nationwide perspective, the pace of return to work has remained relatively normal. On the whole, the demand for resuming work and the pace of return to work in the short-term will support the demand for steel to a certain extent.


However, the demand for steel in the medium and long term is not optimistic. The real estate sales area is expected to show a more significant decline in January and February. According to statistics, the cumulative transaction area of houses in January and February 2019 decreased by 7% compared with 2018. The February sales data released by the head real estate companies such as Evergrande is also obviously not ideal. The difficulty in returning real estate sales will affect future real estate investment, which will have a significant impact on steel demand.


Production fell slightly


In the week of March 7, the utilization rate of rebar capacity of national building steel mills was 71.17%, a slight decrease of 0.2 percentage points from the previous week. In terms of output, in the week of March 7, the national building steel mill rebar output was 3.235 million tons, down 16,000 tons from the previous week.


As steel prices rose, electric furnace profits began to pick up. According to the profit model simulation, the profit of electric furnace in East China is about 300 yuan, while the profit of electric furnace in East China is close to 600 yuan. The rebound in profits has led to a recovery in the utilization rate of electric furnace capacity. The data shows that 53 independent electric furnace manufacturers, the capacity utilization rate rose sharply by 21.59% to 40% in the week of March 7. This figure is clearly the same as last year.


On the whole, due to the impact of profit recovery, the utilization rate of electric furnace capacity has rebounded significantly. Rebar capacity utilization decreased slightly, but the absolute value of production remained high in the past year.


Destocking open


Last week, rebar stocks began to gradually change. According to statistics, in the week of March 7, the intermediate link of rebar was 13.2664 million tons, down 326,100 tons from the previous period. Among them, the social stock of rebar 35 city was 101.121 million tons, down by 74,500 tons from the previous period, and the rebar steel mill stock was 3,154,300 tons, down 215,600 tons from last week.


The Jiangnan area will also be cleared this week, and the construction site will start in succession. With the gradual release of steel demand, it is expected that rebar stocks will decline significantly over time.


Overall, on the supply side, steel production is expected to remain at a high level as the operating rate of electric furnaces gradually recovers. As the local construction sites resume work, it is expected that the inventory will also undergo an obvious process of de-transformation. These factors will drive rebar prices to remain strong in the short term. However, it is worthy of investors' attention that if real estate sales weaken, it is expected that rebar prices will face downward pressure after rising. In terms of operation, investors are advised to pay attention to real estate sales. If they continue to be weak, they can arrange empty orders on rallies.

 

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