In the first half of this year, the steel market experienced a "roller coaster" market. The price began to adjust after hitting a record high in mid-May. As demand entered the off-season, the market continued to weaken, and the current price basically fell to the level of early April. Looking forward to the second half of the year, the suppression and support factors of the steel market coexist, and the overall upward momentum is weak.

Pressure: domestic demand peaks periodically, liquidity and risk appetite are reduced

The domestic economic recovery has weakened and the economy is under pressure to slow down. The economic growth target set in the government work report this year is 6%. Due to the low base last year, there is little pressure to achieve the target throughout the year. The Politburo meeting at the end of April pointed out that To stabilize the window period with less growth pressure, the focus of the macro economy in the second half of the year may be to adjust the structure and build long-term momentum.

As the economic recovery slows, the high point of steel demand after the epidemic has passed, and the demand intensity in the second half of the year will be weaker than that of the first half. Specifically, in the short term, building construction enters the off-season, the demand for building materials is seasonally weak, the growth of infrastructure investment in the medium-term is weak, the leading indicators of real estate are not performing well, the overlapping policies continue to control, the stamina of real estate investment is insufficient, and the demand for steel in the construction industry is not optimistic in the second half of the year; In the manufacturing industry, the growth rate of production and sales in industries such as automobiles and excavators has declined. In the second half of the year, external demand will fall and domestic demand will recover. The expansion of steel demand in the manufacturing industry will slow down, and the high-end equipment manufacturing industry such as shipbuilding and robots will perform well. , Will contribute to the increase in steel demand.

The second quarterly regular meeting of the Central Bank on June 25 reminded that it is necessary to strengthen the research and judgment analysis of the domestic and foreign economic situation, strengthen the coordination of international macroeconomic policies, and emphasize the need to prevent external shocks. This may be related to the Fed's discussion of exiting quantitative easing. Demand expectations are weakening, and the shift in global currency liquidity will suppress market risk appetite. After the previous ups and downs, market participants are becoming cautious.

Support: Steel mills’ earnings are under pressure, supply contraction is still expected

At present, the cost of steel production is still high. Among the main raw materials, the price of iron ore has not fallen much from the previous high, and the price of coke is basically at the high point of the year. According to the calculation of the Lange Steel Research Center based on the spot raw material price, June 25 , The pig iron cost index was 187.1 points, a new high during the year. The price of steel has fallen by nearly 20% from the previous high. The profitability of major steel products has shrunk sharply, and individual products have suffered losses. The cost support of steel prices has become stronger.

In addition, in the context of carbon emission reduction, the contraction of domestic steel supply is still expected. In the early stage, due to the rapid increase in bulk commodity prices, downstream cost pressures increased, which was transmitted to consumer prices to a certain extent, which was not conducive to the recovery of the economy to normal. The policy rebalanced carbon emission reduction and regulation of bulk commodity prices, targeting the steel industry. Proposed to guarantee the supply and stabilize the price. In the medium and long term, carbon peaking and carbon neutrality are ultimately issues that the steel industry cannot avoid. If demand slows down significantly in the second half of the year, the market expects that carbon emissions reduction may return to the policy focus, and policy-based production cuts will support the market.

However, despite the continuous adjustment of steel prices, the current price has fallen to the level of early April, but the downstream has generally reflected huge cost pressures. At the beginning of June, the National Development and Reform Commission proposed to closely follow the trend of bulk commodity prices and do a good job in price forecasting and early warning. The policy's guidance for stabilizing bulk commodity prices has not changed. Whether the policy-based production restriction will be substantially strengthened in the second half of the year remains uncertain. sex.

The steel market entered the second half, and the upward momentum in the second half of the year was weak

The commodity market cannot escape the fate of the cycle, and steel is no exception. After the epidemic, domestic steel demand continued to rise for about a year, and steel prices fluctuated and rose at the same time. After hitting a record high in mid-May, it has dropped significantly.

According to the macroeconomic recovery and the performance of the downstream steel industry, the high point of this round of demand expansion has passed, the global currency liquidity has reached an inflection point, and the current round of the steel market has entered the second half of the cycle. The overall supply in the second half of the year is relatively loose. The orientation of stabilizing the prices of bulk commodities has not changed. The market performance is expected to be weaker than neutral, and steel prices are unlikely to rise in a trend. Demand is a key factor affecting market trends. When supply and demand pressures gradually weaken and supporting factors increase, the market may rebound in stages.