Steel prices are expected to rise after the Spring Festival

Since mid-December last year, steel prices have continued to fall in the desperate situation of “winter storage and no road”, fully demonstrating the tragic picture of the steel market during the off-season consumption period and facing financial constraints. Shanghai Grade 3 rebar dropped from 3,630 yuan/ton in mid-December last year to 3,370 yuan/ton in the recent period, and tons of steel fell 260 yuan, or 8%, while the rebar main 1405 contract in the previous period was also 3,745 yuan/ton. It fell to 3449 yuan / ton, a decrease of 8%. Although the average price of the steel market in 2014 will fall following the fall in raw materials, I believe that after the Spring Festival, steel prices are expected to rise.

Crude steel production dropped sharply. Once consumption rebounds, there will be tension in the spot market. According to the latest data from the China Iron and Steel Association, in the last ten days of last year, the daily output of crude steel of China's member companies was 1,638,400 tons, a decrease of 3.17% from the previous period; the national average daily production was estimated to be 1,960,600 tons, a decrease of 2.67% from the previous period. In this way, the daily output of crude steel in December was 1.995 million tons, which was a 6% decline in November from the previous month. This year's Spring Festival is relatively early, coupled with the "Northern Freight Southward" comes earlier than before, in the absence of traders, the steel market fell earlier than before. After the fifteenth day of the first lunar month, peasant workers have returned to the site and the construction site has gradually begun to work. It will then appear that traders’ inventory will remain low, which is bound to boost steel prices.

Social inventories are low and corporate stocks are down. In early March of 2013, steel stocks reached 22.51 million tons and rebar stocks reached 10.95 million tons. As of last week, steel stocks fell to 13.51 million tons, rebar stocks fell to 5.28 million tons, and stocks fell by 40% each. 52%, the inventory and consumption ratio also fell to the lowest in the same period in recent years. At the same time, the situation of high stocks in steel mills has also improved. At the end of December last year, the key statistics for iron and steel enterprises' steel inventories was 12,87,500 tons, a decrease of 974,700 tons from the previous ten-day period, a decrease of 6.86%. From a monthly level, last year's steel mill inventory levels in November and December last year remained around 39.9 million tons, and steel mill stocks did not deteriorate. Pre-holiday mills are continuing to clear the stocks. If steel companies do a lot of inventory clearance due to the lack of traders' enthusiasms, and January stocks do not rise, they will have a positive impact on market sentiment after the year.

After the holiday season, the ore may appear to be ready to support the steel price. This winter, not only the steel market lacks winter storage, but also the ore market lacks winter storage. The reasons are as follows: 1. The market is more pessimistic about the ore price in 2014, so it is reluctant to store it in winter; 2. The market is relatively tight and lacks funds. Capital, can not winter storage; 3, "environmental protection" factors limit part of the production, demand has declined. Even if the weather factors affect the transportation and production in Australia and Brazil, the above reasons will cause the domestic ore to hardly rise in the first quarter. The market is rationally pricing the future. After the end of the year, once the demand for terminals has recovered, the steel market will turn for the better and the steel mills will have to buy ore. If the import of foreign minerals hits the weather and causes transportation to stop, then the ore price may rise quickly.

In summary, due to the market's pessimistic expectations coupled with the dual pressure of “money shortage”, the phased prices of steel and ore may have been oversold. After the end of the year, with the gradual release of terminal demand, preparation of warehouses becomes a must. With the advent of the new financial year, the funding situation will also improve. Therefore, the price of steel and ore prices may rise in tandem and there is a wave of rally.