Since late October, the center of gravity of the black industry chain has moved up as a whole, and the price of steel spot, iron ore and coke has risen by about 10%. Iron ore originally rose the most, but with the strengthening of port iron ore supervision in conjunction with the Water Transport Bureau and the Price Supervision Bureau, it peaked and fell in the short term. As for scrap steel, only about 3%, the rise is really not enough, compared with other varieties, dwarfed by other varieties, even the fall in October has not been fully recovered. 
It's always brothers who eat meat and I drink soup, it's not suitable, will there be a replenishment of scrap steel in December?This article explains the reasons why the price increase of scrap steel is more difficult than that of other varieties, and tries to predict the next scrap market and the industry risks that need to be focused on by analyzing the logic behind the market since October, the important macro information of the market in December and the possible changes in the industry. Scrap is easy to fall and difficult to rise with the downstream orders of the industry.
First, the low concentration of the industry is closely related to the oversupply of processing capacity. The downstream of scrap steel is mainly steel mills and some foundries, of which steel mills account for about ninety percent and have the absolute right to speak. In recent years, China's real estate industry has entered a downward cycle, the rate of new housing starts has fallen sharply, and the demand for steel has contracted sharply. Steel mills have meager profits, and under the strong upstream iron coke and strong costs, they can only choose to reduce losses by suppressing scrap. And the scrap steel happens to be the soft persimmon that the steel mill can handle. This is mainly due to the current competitive landscape in the scrap industry. After a round of capacity expansion in the scrap steel industry in the past few years, the current processing capacity is seriously overcapacity, and many processing bases are not full, in order to maintain production, the phenomenon of grabbing goods is frequent. Taking crushed material as an example, the capacity utilization rate of the crushing line we investigated this year is not even less than 30%. Regardless of whether this phenomenon is caused by the slow release of scrap resources or the failure of steel mills to keep up with demand, it objectively does cause the survival dilemma of the current base. There are not a few old irons who lose money and make money and struggle to maintain. On the one hand, scrap steel is inherently a business that eats by looking at the face of the steel mill. At present, the steel mill can only drink porridge, and it is good that the old iron people can eat meat and drink rice soup. On the other hand, scrap steel is still a small scattered competition pattern, although there are Ouyeel, China Recycling, Zhongtuo and other large chain enterprises in the integration, but many are ticket tax business, really into the bureau to do processing is still few. It is suppressed by steel mills, and it is natural that it cannot form a joint force internally, so it is easy to fall and difficult to rise. Fortunately, the current scrap steel has been in a tight balance for a long time, and while it is easy to fall and difficult to rise, scrap steel is also slow to rise and fall. Since late October, this round of steel prices has rebounded, I think it is mainly due to two factors. First of all, the market's expectation of improved demand driven by the steady growth policy next year has been further strengthened, especially after the Ministry of Finance announced the issuance of an additional 1 trillion yuan of special government bonds. On the other hand, after more than half a year of output compression and destocking process, the fundamentals are relatively healthy, and low inventory has led to a certain degree of structural tightness in the spot. Of course, the most important thing is the role of macro expectations, but the ladder can not only climb up, expectations need to be verified by reality, this round of actual speculation in advance next year's new construction is expected, the current ladder is not a mirage is also difficult to say. Let's first review the current fundamentals of scrap with the data of 255 sample steel mills:The arrival was close to 590,000 tons, a new high in the second half of 23 years. At present, more waste resources are released, and short-term arrivals may maintain a high levelRequirements:The daily consumption of scrap steel in steel mills has increased to about 570,000 tons, especially the electric furnace has a strong enthusiasm for increasing production due to profit preference, while the profit of blast furnace due to the short-term peak of iron ore has improved slightly, and the cost performance of scrap steel is better, and the amount of scrap has also been appropriately increasedInventory: At present, the inventory of steel mills has risen to about 5.5 million tons, of which the inventory of scrap raw materials of blast furnace steel mills has increased by nearly 65% year-on-year, and the enthusiasm for price increase is not strongProfit:At present, the profit of East China electric furnace steelmaking valley electricity is 220 yuan, and the flat electricity is 60 yuanValue for money:At present, the price difference of snail scrap has widened to about 1,120 yuan, and the price difference of iron scrap is 310 yuan, which highlights the cost performance of scrap, which will help steel mills maintain or slightly increase the demand for scrap. From the perspective of scrap itself, the current fundamentals are quite healthy, supply and demand are rising at the same time, and supply and demand should be said to be relatively balanced. The arrival of the goods is unexpectedly good, and the Spring Festival will be a little later this year, and the scrap steel resources are likely to be able to keep up. In the case of good scrap price, long-process steel mills have slowly made some inventory (such as East China large mills, daily consumption of 1.).about 70,000 tons, and the reported inventory has reached about 650,000 tons). The daily consumption of electric furnaces is a bit lagging behind in the early stage compared with profits, but it seems to be accelerating to catch up with the peak recently. Last week, the electric furnace plant to increase production and resumption of production and willingness to do a survey, to the results of the survey, this week's daily consumption increased sharply again is indeed a little unexpected, but see that the electric furnace profits are still maintained at such a good level, it seems that the words and deeds of the electric furnace plant have an understanding, after all, the whole year is lying in the nest, worried that the profit improvement is just a flash in the pan, the action is slightly sluggish, and in the view that the profit continues to maintain, regardless of how long it can be maintained, stop the doubt, hurry up to produce, and find a loss is the right thing. 1. The macro temporarily retreats to the second line, the supply and demand of steel are temporarily dominant, and the climate of scrap steel may turn negativeMacro speculation has entered the current stage, and some funds have the urge to take profits, and the reality may not give steel prices the impetus to continue to be the best. Changes in steel mill profits, steel production and inventories may become key influencing factors in the steel ** in December, while the actual end of the thread inventory increased month-on-month, thread production has risen to an eight-week high, and the risk of accumulation seems to be brewing again. In this regard, the market in December may be a major adjustment of the rhythm. Steel mills are unlikely to continue to expand their profits, and it will be difficult to increase the price of scrap when there is no shortage of scrap. Here we should also focus on the next ** economic work conference (possibly in the middle of the year). 2. In the early stage, look at when the electric furnace production will peak, and in the later stage, look at the willingness and intensity of winter storageJudging from the timing of winter storage in previous years and our research on the willingness of steel mills to store in winter, this year's winter storage time is behind, and most steel mills are estimated to start entering winter storage until late December. Temporarily excluding the key variable of winter storage, the foothold of the fundamental judgment in the early stage of December is on the daily consumption of scrap steel. For long-process steel mills, although the current profits have improved under the supervision of iron ore, the willingness of steel traders to store in winter may not be strong, and it is unlikely that steel mills will accumulate building materials for the winter in the current real off-season. For electric furnaces, there is really not much room for increasing production, and the capacity utilization rate of our 89 electric furnaces is close to the peak in March. The increase in the long and short process is limited, from the scrap steel **, the market feedback in November is that the domestic manufacturing production is relatively strong, and the waste production of household appliances, automobiles, electronics, etc. is preferred, and at the same time, due to the small and stable scrap steel this month, the social and site processing are at a good level, and the overall increase in scrap steel is more obvious. The electric stove probably doesn't need to worry about not having enough to eat. 3. On the whole, short-term scrap steel may usher in a narrow range of adjustmentsAfter the adjustment, after the expected fermentation and the start of winter storage of steel mills, the supply and demand of scrap steel may gradually become tighter, and there is a possibility of strengthening in the case of steel stabilization. However, there are many uncertain factors, there is no independence at present, and there is no sign of a significant increase in the overall valuation of the black industry chain.