The steel price oversold and bounced back down again to enter the market to participate in buying hedges

Since September, there has been policy escort, with QE3 boosting. Shanghai Steel has ended its long-term downtrend with a “V” reversal pattern, while last Thursday’s steel price rebounded sharply and spot market confidence fell sharply. This week Shanghai Iron and Steel once again pulled up strongly, but the rebound process was accompanied by a substantial lighten up. This wave of steel price rise is the fundamentals have improved, or a technical rebound? For the forthcoming fourth quarter, how will steel prices be interpreted? In response to this topic, the current round of the city round table invited senior analysts from the steel city to discuss.

Moderator: In the last week before the holiday, how did you view the current trend of Shanghai Steel? What are the uncertainties during the long holidays? How should investors lay out positions before the holiday?

Jiang Liwen: As the domestic economy is in a declining trend, the overcapacity in the steel industry is obvious, and the downstream demand is weak. The main rebar contract 1301 fell from 4331 at the beginning of the year to 3206 at the beginning of September, a drop of 26%. There was almost no decent rebound during the period. Therefore, technically rebar has a strong oversold rebound kinetic energy. In addition, there are no doubt that frequent domestic and foreign favorable policies have also boosted the rate of increase.

However, in the short term, a strong rebound in steel prices may engulf future space if downstream demand does not fully recover. A large number of infrastructural projects will be gradually built in the coming period. The demand is not limited, and as of August, the data on real estate starts is still lacking, so the market will enter a period of rest to digest the sharply rising steel prices, especially before the long holidays. One week, investors have more risk aversion, and they are willing to take advantage of long-shortening positions.

After QE3 is expected to be honored, the market focus shifts to the fundamentals of the economy and the latest trends in the debt crisis in Europe. For example, if a series of data such as the PMI announced in early October continues to be weak, it will undoubtedly increase investor pessimism. Therefore, in general, in the last week before the holiday, rebar will maintain the main range of 3480-3600 range oscillations. Prudent investors can gradually reduce their positions in the hands, reduce their positions, and avoid being affected by domestic and international news during the holidays.

Lu Xiaohua: The rebound of steel prices on the one hand is due to the improvement of fundamentals. With the introduction of stimulus policies, steel market confidence has recovered and steel prices have risen sharply. On the other hand, the retaliatory rebound occurred because of the large drop in steel prices in the early period.

In the fourth quarter, the bottom of Shanghai Steel will be elevated, the average price is higher than the third quarter, but it does not have the conditions for continued growth, and the scope and space for the increase are limited. Therefore, in the fourth quarter, Shanghai Iron and Steel will perform a range oscillation at the bottom. During the last week of the holiday, as the nation’s social stocks continued to drop sharply, and the terminal was stocked before the holiday, the ** disk out of the stock market. However, the current steel price has risen excessively, and there is a possibility of a correction after a long vacation. However, the magnitude of the correction will not be too great because the fundamentals of the steel market have improved. It is suggested that investors should take a wet storage for a holiday. After the holiday, the capital construction of China's infrastructure projects may be a risk factor that affects the trend of steel prices.

Moderator: Recently, rebar destocking was stable and social inventory fell below the level of the same period last year. At the same time, it is said that the development activities of real estate such as Vanke and green areas have also been further increased, and the area under construction in the market is expected to rebound, which will benefit the decline of social stocks. However, the stocks of steel mills have continued to grow. Between the “one reduction and one increase”, in the fourth quarter, can the weak supply and demand situation of the steel market really be reversed, and how will the steel price outlook be interpreted?

Xie Zhaowei: At present, the decline in social inventories is mainly due to the recent increase in investment in the real estate industry and the rebound in the area of ​​construction started. Coupled with the continuous decline in steel prices since the second quarter, the steel trade enterprises have been greatly injured and the slight improvement in demand has led to steel trade. The company does not have enough confidence to pick up the goods. Taken together, the current consumption of construction steel is still weak, and the decline in social inventory corresponds to the continuous rise of steel mill stocks, but the stocks of steel raw materials are generally low. From the daily output data of crude steel, it can be directly reflected that the current operating rate of steel mills is still at a high level, because the loss of steel mills has not been able to continue effectively, resulting in low enthusiasm for production cuts. If the market demand can maintain the trend of improvement, it is not ruled out that the steel price will slowly rise in the case of limited profit reduction area of ​​the steel plant. However, due to the contradiction between supply and demand is still relatively large, the steel price rebound is limited, and the real reversal of the steel price still requires a large area of ​​the steel plant. Reduced production support.

In the short term, due to the full recovery of demand still remains to be seen, the main factor determining steel prices is the supply factor. Only when the price of iron ore is relatively strong, the steel mills continue to suffer losses, and the steel mills are forced to reduce production (I expect to reduce production to an average daily output of 1.85 million tons). Short-term steel prices can be effectively supported. Due to the better demand in the medium term, the steel price in the fourth quarter will depend to a greater extent on the recovery of actual demand. If the stricter macro-control policies of the real estate market no longer appear, the Ministry of Railways will also accelerate the construction of railway infrastructure. In addition, the projects approved by the local governments in the previous period will gradually boost domestic investment growth, and steel prices will gradually pick up in the fourth quarter.

Moderator: Under the continuing downturn in the downstream demand of the steel industry, the level of ore prices and firmness determine the cost support of the steel mills, which will determine the output of steel mills. Starting in September, Singapore's iron ore settlement price also rebounded slightly with the rebound of steel prices. However, given the current sluggish demand, can iron ore prices stabilize and rebound in the late period to provide strong support to the steel market?

Zhuo Guiqiu: In September, the strong rebound in steel prices drove the sharp rise in iron ore prices. Affected by this, the freight rates for the Brazilian mines and Australian mines to China have successively increased, and the Baltic dry bulk index has also risen after a new low. The rise in sea freight has in turn supported the price of iron ore and kept steel prices firm. Recently, the average production cost of rebar has increased to RMB 3,400-3,500/t, while the rebar 1301 contract has recently rebounded after dropping to RMB 3,436/t, and the cost support effect has emerged. At present, there is limited new and effective demand for “Jinjiu”, the function of the steel trader “reservoir” is impaired, and steel prices continue to rise sharply. However, the "silver ten" demand is still worth looking forward to, Baosteel, Wuhan Iron and Steel's October price policy options are flat, but also implies steel mills confidence in the market outlook. Therefore, it is expected that the short-term steel price and the ore price will enter the wait-and-see period, and the possibility of a sideways trading is more likely.

Moderator: How drastic changes have taken place in the steel market? How should the steel traders in the market should take advantage of the rhythm to participate in hedging to avoid risks?

Liu Mingliang: The rebar has continued to fall in the early stage and has received extensive attention and participation from steel mills, trading companies and construction companies. From the perspective of participation, individual traders did not have sufficient estimates of the situation and had a heavy psychological outlook. They started to buy at 3,600 yuan/ton, and then stopped as steel prices continued to fall. When a trader entered the market at 3,800 yuan/ton, he kept a hold on the inventory and the steel price fell to 3,300 yuan/ton, but then the steel price rebounded to 3,500 yuan/ton. Loss. There are roughly two types of participation of real estate companies. One is when steel prices have fallen to around 3,500 yuan/ton. Housing companies think that they are cheaper than buying a spot. They buy a large amount when they enter the market. The subsequent fall, however, can withstand, but then rebound. Earn a profit on the field. The other is that steel prices have fallen to 3,200 yuan/ton and they have not dared to enter the market. In general, the above situation shows that various types of spot companies do not have enough knowledge of the ** market. After the market operation, waiting for the steel price oversold and rebounded and then fell again, trade companies and construction companies can enter the market to participate in buying hedge.