After the holiday, the cold and hot-rolled coil market continued to fluctuate, and traders were not smooth in their shipments, and they were generally cautious about the market outlook.
Affected by the severe epidemic prevention and control situation in many places in China, the release of downstream demand was blocked, the overall market transaction was light, and the demand for steel decreased. In view of the market trend of cold and hot rolled coils in the later period, some experts predict that from the perspective of market fundamentals, the cold and hot rolled coils market is expected to stabilize and strengthen in the short term. But also focus on the following uncertainties:
First, the impact of the epidemic on the release of downstream demand is uncertain.
Since March, a new round of the epidemic has spread in China, which has had a greater impact on the production and operation of the manufacturing industry. The latest March manufacturing PMI (Purchasing Managers' Index) fell further from February, entering a contractionary range again. This shows that the prosperity of the manufacturing industry has been greatly affected by the epidemic. It is expected that the demand for cold and hot rolled coils in the downstream manufacturing industry will decrease.
Fortunately, in the later period, as the epidemic prevention and control situation gradually improves, the production of automobiles, home appliances and other manufacturing industries will resume at a faster pace. If the demand release is optimistic in April, it will boost the demand for steel including cold and hot rolled coil. It is expected that the decline in steel inventories in April is expected to accelerate, which is conducive to the stable and strong market prices of cold and hot rolled coils in the later period.
Second, the impact of the epidemic on the supply of market resources is uncertain.
Affected by this round of epidemic, the release of production capacity of steel enterprises in many parts of China has been hindered and production has declined. In the first two months of this year, the national average daily output of crude steel reached 2.6773 million tons, down both year-on-year and month-on-month. Steel companies in individual regions have reduced production or even stopped production due to losses, affecting an average daily output of about 39,400 tons. Under the control of the epidemic, the supply of raw steel, fuel and auxiliary materials was insufficient, and some steel enterprises in the Northeast region were forced to stop production of electric furnaces. According to statistics, the PMI of the steel industry in March was 44.3%, down 3 percentage points from the previous month. Among them, the production index was 45.4%, down 3.8 percentage points from the previous month. The impact of this round of epidemic on the release of market resources is obvious.
At present, the epidemic situation in some parts of the country has been effectively controlled, and local steel companies are speeding up the resumption of production. For example, on April 10, Tangshan City, Hebei Province lifted the temporary global lockdown management.
Third, the rigid cost of supporting steel prices is uncertain.
Since March, the prices of iron and steel raw materials such as iron ore and coke have risen sharply. On April 8, the price of iron ore futures rose to 918.5 yuan/ton, an increase of 74 yuan/ton from the previous month. At the same time, the market price of scrap steel continued to be strong, and the price of scrap steel in various places rose by RMB 50/ton to RMB 150/ton. The high price of steel raw materials and fuels has led to a continuous increase in the production costs of steel enterprises and a significant shrinkage of benefits. Therefore, steel companies are basically making upward adjustments when determining the ex-factory price of steel. Affected by this, the procurement cost of resources put on the market in the later period will increase, which will largely curb the decline in the market price of cold and hot rolled coils.
