🌐 Big Shot Talks Steel Market: Anti-fall Characteristics Gradually Appear, Steel Prices in July Expected to Rise Fluctuatingly 📈

My Steel Network News: Looking back at the June market, the macro environment was in a "vacuum period," yet there was a lot of news about production restrictions. Some steel mills have already received relevant document notices, and the path of production restriction is clear, but the actual development still needs attention. On the raw material side, although the iron water has reached a new high within the year, the contradiction of strong iron ore supply and weak demand is large; on the finished product side, entering the off-season, the steel market faces pressure, and the demand for rebar and hot-rolled coil is generally weak.

🔍 Core Viewpoints 🔎

On the supply side, steel mill profits have shrunk, orders are weak, and future production plans will be determined according to market conditions. According to the research by Century Construction, as of July 2, the fund arrival rate at the construction site has been declining for three consecutive weeks, with an increasing decline rate, and the sample construction site fund arrival rate is 61.08%, a week-on-week decrease of 1.52 percentage points.

On the demand side, the strong rainfall in the south has led to high inventory levels at steel mills, which are unwilling to reduce production, and the low southern prices have resulted in the "southern materials moving north" phenomenon. Entering the off-season, the rainy weather in the south and the scorching heat in the north have made the construction progress of some construction sites less than ideal, especially the rainwater disaster in the south has increased the difficulty of construction, and demand is poor.

As the rainy season ends, the construction progress in the south will gradually recover, and the pent-up demand for building materials is expected to be released. Moreover, the gradual implementation of steel mill production restriction policies will effectively reduce market supply, ease the contradiction of supply exceeding demand, and further support the recovery of steel prices. Finally, the expectation of the Federal Reserve's interest rate cut in the second half of the year still exists, which is also favorable for the rise of bulk commodities. It is expected that the steel price in July will fluctuate and operate in a strong trend.

📝 Specific Content 📝

Before the production restriction is implemented, there will still be repeated games on the expectation of production restriction. At present, it is difficult to change the weak steel price, what is the current production structure of the steel mill? How is the profit and order situation? Are there any new production plans for the later period?

[Industrial Wire] At present, the factory is still mainly cold heading steel, high added value boutique steel products, with profits basically flat and orders maintained at about 100,000-120,000 tons per month. Later production plans will be determined according to market conditions.

[Steel Profiles] At present, the pig iron market is in a situation of strong supply and weak demand. In terms of pig iron enterprise profits, steelmaking pig iron enterprises have certain profits, and some foundries are on the cost line or have some enterprises with large inventory, and the cost was high in the early stage, in a loss state. At present, the order of iron factories is more a case-by-case discussion, with slight fluctuations with the fluctuation of raw materials and futures, and the inventory is different in different regions affected by cost, transportation distance, and the judgment of the future market. But overall, the profit is poor, and the order is weak.

[Steel Pipe] On the tube mill side, the tube mill is now more about strictly controlling production according to market demand research, not like before, it would make some reserves in advance. Under the strict control of production, the raw material inventory has further accumulated, and the long process strip steel production profit has been continuously compressed with the sharp decline of futures.

[Cold Plating] The annual production of hot-dip galvanized plate is 250,000 tons, the color steel plate is 300,000 tons, the aluminum-zinc plate is 350,000 tons, and the cold-rolled product is 600,000 tons, etc. At present, the spot circulation price of private galvanized plate coil in Wuxi market is between 4290-4390 yuan/ton, and the spot circulation price of state-owned unflowered galvanized plate coil is between 4800-4900 yuan/ton. The feedback company's galvanizing two lines were all full load production before the Dragon Boat Festival, with a monthly output of about 40,000 tons, and after the Dragon Boat Festival, the demand suddenly shrank more severely, and now it can only sell a little more than 30,000 tons.

[Construction Steel] The continuous rainfall in the south has led to the unsmooth circulation of spot goods. All steel mills do not have the willingness to reduce production and stop production to complete various indicators, and the factory inventory has always been high, with the lowest unit price in the country. The low price has lasted for two months nationwide, and the steel mill inventory is accumulated, and the production loss is serious, and the steel mill has gradually increased. The existence of the north-south price difference leads to "southern materials moving north," and the surplus resources are digested, and sales and inventory will return to normal levels.

Overall, the steel procurement rhythm has become more cautious, and each project party, in order to cope with the uncertain market environment, has adopted a strategy of purchasing on demand to reduce the risk of inventory backlog. This trend is expected to continue until the weather conditions improve and market demand recovers.

[Industrial Wire] The 5-7 month period is a traditional off-season, with the south being rainy and the north being hot, and the construction progress of some construction sites is not ideal, especially the rainy weather in the south has increased the difficulty of construction, resulting in the progress not advancing on time, and the purchase quantity has decreased by about 10,000-20,000 tons compared with the same period last year, and it is expected to be better in July.

[Steel Profiles] At present, downstream enterprises generally purchase on demand, and inventory control is relatively strict, and they are unwilling to use funds for inventory. In terms of downstream procurement rhythm, except for the sharp rebound in early April when the price hit the bottom, customers placed orders in concentration (about a month's inventory), at other times they are cautious and wait and see, purchasing on demand. The downstream customers we understand are not very optimistic about the market, but they also say that if the market has a more obvious advantage, they will adjust in time and prepare a certain amount of inventory.

[Steel Pipe] In terms of construction, the overall construction start rate of Wuxiang's engineering projects in the first half of the year has been reduced by about 50%. With the decline of the real estate industry and the intensification of local debt risks, the construction start rate of downstream projects in Wuxiang has declined significantly compared to last year. Although the bonds issued by the country have further alleviated the pressure of local debt, traders are still cautious about engineering orders. At present, the overall procurement rhythm of Wuxiang engineering is slow, some projects have reached the end, and the progress of new projects is relatively slow.

How do you think the market trend will go in July? With the end of the rainy season, the construction progress in the south will gradually recover, and the pent-up demand for building materials is expected to be released. The resumption of the project will promote the recovery of steel demand, especially in infrastructure construction and real estate projects. The northern market will also show strong demand growth in the construction peak season, which will help to balance the market pressure brought about by the "southern materials moving north" in the early stage. In addition, the gradual implementation of steel mill production restriction policies will effectively reduce market supply, ease the contradiction of supply exceeding demand, and further support the recovery of steel prices. As the pressure on the production side is reduced, the profit margin of steel mills is expected to improve, and market confidence will gradually recover.

On the financial side, active measures by banks and state-owned enterprises will inject more liquidity into the market, alleviating the tight situation of project funds. The improvement of the financing environment will promote the enthusiasm of downstream enterprises for procurement and increase market transaction volume. Overall, although there are market fluctuations, under the joint action of multiple favorable factors, the steel market in July is expected to show a fluctuating upward trend, gradually moving out of the doldrums.

[Industrial Wire] At present, the overall profit of steel