**Disk** operation, finished products ** loosened, the impact of macro news is unknown, this year's post-holiday scrap steel market "good start" has not arrived as scheduled, the old iron is full of complaints and more is lack of confidence, so how about the resumption of work and production of the scrap steel market after the holiday? What will be the direction of the scrap market in the short term?
[Macro aspect].
Before understanding the macro policy, we must first identify the troika of scrap terminal demand, namely real estate, infrastructure and manufacturing, which is why scrap practitioners need to pay attention to these three aspects of news. Recently, there are several major macro policies related to the following:
1.China's central bank kept the one-year loan market** interest rate (LPR) at 345% unchanged, five-year loan market** rate (LPR) from 420% to 395%。(Positive).
2.According to the Ministry of Housing and Urban-Rural Development, as of February 20, 214 cities in 29 provinces across the country have established a real estate financing coordination mechanism, and proposed a "white list" of real estate projects that can be given financing support in batches and pushed them to commercial banks. (Positive).
3.**The General Office issued a document requiring 12 provinces and cities not to start new projects in 2024 except for basic livelihood projects. (Bearish).
It can be seen from the above that there are good and negative macro news, but the overall positive trend remains unchanged. However, according to market feedback, in the case of turbulent international situation and insufficient endogenous power, it is difficult for market confidence to be effectively boosted, so the good news is usually only stimulated after the market investment, and it is difficult to drive the increase in physical consumption. However, after the news was digested by the market, the market changes returned to the fundamentals of supply and demand, so we will look at the recent trend of the scrap market from the two aspects of supply (market) and demand (steel mills).
[Steel mills].
According to Mysteel's research, most of the long-process steel enterprises consume warehouse production during the Spring Festival, and the electric furnace factory will have to wait until about the fifteenth day of the first month to resume work. The social inventory of scrap steel decreased by 25% compared with the same period last year (lunar comparison), showing a cliff-like decline, which shows that the current circulation of scrap resources is tight, coupled with the rain and snow weather that has led to the obstruction of shipments, so after the fifteenth day of the first month, when the scrap market basically recovers, the demand for steel mill replenishment still exists, which has certain support for scrap steel in the short term.
However, Mysteel data shows that as of February 16, the cumulative global iron ore shipment volume in 2024 has increased by 8.48 million tons year-on-year, and the inventory of 45 ports in the first week after the Spring Festival is 13,676140,000 tons, 4% of the cumulative range, at a high level of accumulation during the Spring Festival in previous years, but on February 16, the profitability of 247 steel mills in Mysteel was 2554%, which is also at a historical low for the same period.
On the one hand, iron ore, as a steelmaking-related variety, has improved the cost performance of molten iron after the fall, and the cost performance advantage of scrap steel has weakened; On the other hand, iron ore has dragged down steel, and the profits of steel mills are already hovering on the edge of profit and loss, so it is more difficult to improve production enthusiasm, and the willingness to purchase steelmaking raw materials, that is, scrap steel, will also be reduced.
In addition, although China's steel exports in 2023 will increase significantly by 35% year-on-year to 9120180,000 tons, the highest level since 2017, but this is not due to strong foreign demand, but domestic demand is difficult to digest the excess crude steel output, and relying on exports alone to solve the dilemma of domestic crude steel surplus is also difficult, after due to China's steel ** at a low international level, stimulated the anti-dumping behavior of some ** partner countries, India imposed a five-year anti-dumping duty on Chinese steel products. Therefore, under the pattern of multiple factors intertwined game, it is difficult for steel mills to increase their long-term production willingness significantly.
[Market].
As of February 22, mysteel's survey results on the trend of some domestic scrap steel markets next week are as follows: 388 scrap processing and distribution enterprises were surveyed on our network, 1778% hold a price increase view, 1211% hold a downside view, 7010% hold the price stabilization view. At present, the scrap steel market has not fully recovered, and the large-scale processing base has resumed work, but the worker arrival rate is low.
Although the demand for replenishment of steel mills after the holiday still exists, but considering the operation of the first disk, there is no significant increase in finished products except for rigid demand, and the macro impact is not clear, so the phenomenon of blind hoarding of goods in the market is minimal, mostly to hold a steady wait-and-see, and under the weakness, businesses mostly take their own profits as the primary consideration, and the operation rhythm of fast in and out, and out of profits may continue to become the main theme of the scrap steel market.
In addition, as the important meeting is approaching, the market still has expectations for policy expectations, especially before the downstream terminal demand has not been fully launched, and some businesses still have hope for the golden three and silver four.
[**Prediction].
Combined with the domestic medium and long-term environmental protection development goals and steel production process, the foothold of the future supply-side policy may consider a more refined way of reducing consumption and carbon emissions, so that the policy direction of the steel industry to reduce and limit the output of the long process, and at the same time improve and advocate the development of the path of short-process production, which will not only help improve the profit dilemma of the industry, but also help to achieve the long-term goal of high-quality development of the country.
On the whole, the operation of the first disk, coke ore dragged down the steel downward, and the cost performance of scrap steel contracted, but the demand for steel mill replenishment still exists, coupled with the shortage of scrap resources, rain and snow have hindered shipments, and it is expected that the activity of scrap steel trading will gradually appear after the Lantern Festival, and the short-term scrap steel is still cautiously optimistic, and it is still necessary to pay attention to the changes in supply and demand of finished products and the trend in the long term. February** Dynamic Incentive Program