Rebar prices continue to innovate in low steel market

The summer is over, and the steel market has not yet finished in the winter.

This extreme "fall" has finally reached a climax this week. Shanghai rebar futures once again drastically dipped on Wednesday, once approaching the daily limit price, its main 1301 contract fell to 3,327 yuan / ton, to refresh the record since the listing of the lowest. However, the rebound in the afternoon brought back the momentum. The above-mentioned contract eventually closed at 3443 yuan/ton, which was 0.89% lower than the previous day. At the same time, the volume of the entire contract of this variety also reached 4.39 million or more, which was the first daily turnover of Shanghai rebar after November 2010 exceeding 4 million lots. The coke on the upstream side of the steel is even worse. Dalian coke futures fell below the limit yesterday, and the rebar price rebounded slightly in the last hour before the close.

An analyst of a steel spot trading platform in Shanghai told the reporter: “According to the current spot coke price of more than 1,300 yuan per ton and the iron ore price of 1,050 yuan per ton, the average steel cost of domestic steel mills is estimated to be around 3,300 yuan per ton.” As of yesterday, the spot price of Shanghai tertiary rebar was around RMB 3,530/t, and the spot prices in Shanghai and Tianjin were also between RMB 3,440 and RMB 3,860/t. In other words, the domestic rebar period and current prices are increasingly approaching the cost line.

Insufficient power to reduce production

“Almost from September last year, domestic steel prices have basically fallen, and coke prices have been falling all the way.” Some insiders recalled. These two hard-core brothers have spent almost the entire winter in the past year. Shanghai rebar futures prices have fallen from more than 4,800 yuan per ton in early September last year, and the drop has reached more than 28% so far. The coke futures fell more than 36% over the same period. Since the listing last year, the coke price has generally unilaterally oscillated.

Steel prices are falling, raw material prices are also falling, and stockpiles of raw materials accumulated by steel mills before the price plummet are facing a huge risk of falling prices. Although the downstream consumption of the steel market is poor, companies have to consume raw materials through production. The intensification of contradiction between supply and demand led to a sudden acceleration of the fall in steel prices from July to August this year. The price of the Shanghai rebar mains fell by about 14% again after falling below 4,000 yuan per tonne in early July, and as of yesterday, the futures price has been continuous. Thirteen trading days fell, and the cumulative decline during this period was almost 10%. "Although the steel prices have continued to fall, but the steel mills cut production is not obvious, and now companies are still in a period of digestion of raw materials." The above said.

Taking into account the depreciation of fixed assets of steel plants and the cost of staff salaries, although the steel market has continued to weaken in the past year, the price has not fallen below the marginal cost of steel mills. Even if it is not produced, the company is on personnel, plant and other projects. There are still costs, and the willingness to reduce production is not strong. And if the price of raw materials such as coke continues to decline, the cost of future steel mills will decline, so companies will lack the power to reduce production. “So the more the steel mills hold the high inventory in the previous period, the greater the degree of losses, while those with faster inventory turnover have smaller losses, and the larger stocks in the early stage have larger losses than the small ones.

Of course, he also pointed out that the root cause of the weak steel market lies in the imbalance between supply and demand, as well as excess production capacity brought by the previous economic stimulus plan, and the domestic steel industry output has remained high for a long time. It is understood that from the first quarter of 2009 to the first half of 2012, the average daily output of domestic crude steel increased from 1.4 million to 1.6 million tons to 1.8 million to 2 million tons. The consumption of steel such as rebar has weakened. From May to July of this year, in the Shanghai market alone, the weekly purchases of wire rods and rebar have once decreased by about 50% from last July.

Short ferocious

In the period when the current steel price plummeted, the market shorts seemed to have been chasing victory. The total positions of Shanghai Rebar futures contracts have almost tripled in the past year, from about 400,000 hands in early September last year to 1.59 million in August 29 this year. After the price of rebar futures fell below 4,000 yuan/ton in July this year, the pace of active offensives by bears is still accelerating. From July 10 to Wednesday, the price of this type of products increased by 52 while accelerating the price decline. %.

Judging from the current seat positions, Zhejiang Yong'an Futures is the shortest remnant seat for the rebar futures 1301 contract. There were still 86290 shorts yesterday and 37250 hands cleared. In the top 20, the highest number of short positions, the short position still occupies a clear advantage. The top 20 “Air Forces” hold a total of 498,720 contracts in 1301, which is higher than the number of single seats in the top 20 seats. More than 130,000 hands.

However, the rebound in steel prices yesterday afternoon seemed to have allowed the main short seller to converge, and some short-term profit-taking orders appeared to have left. The three seats of Zhejiang Yong'an, Shenwan Futures and Galaxy Futures slashed 3,518 contracts, 3,406 contracts and 14,444 contracts with the short-selling 1301 contract yesterday. The 20 seats with the highest position in the short-listed position only added 1302 contracts to the short-term contract of 1301 yesterday, which is far less than the long increase of 27,647 lots in the top 20 seats.

Only the air force's camp apparently had a disagreement. While the above three seats exceeded 21,000 hand empty single withdrawals, there were still plenty of empty seats for other large seats. Haitong Futures and Zhejiang Futures Futures yesterday increased the number of contracts for the 1301 contract by 10359 and 10951 respectively. On the contrary, yesterday's "opinions" for multiple main seats were relatively uniform. Only 5 of the top 20 multi-member seats saw a long-term reduction, and the rest were all increased in different degrees.

From the position and period of rebar futures listing since March 2009, the current price trend shows that the position of the variety has reached the inflection point of the price three times after reaching the high level of 1.6 million to 1.7 million hands, while the market price reversed. Positions have also dropped sharply, and the aforementioned positions have appeared to have become the historical bottleneck of open interest. For example, from July 2010 to February 2011, rebar futures positions have rapidly dropped from a high of about 1.7 million hands to more than 700,000 hands, and prices have risen to record highs during the same period. Today, the total rebar positions are once again approaching record highs and should be sufficiently vigilant for shorts, while the 20-month high trading volume seems to herald the possibility of the arrival of the bottom, in line with the fundamentals that steel prices are constantly approaching cost. The risk of continuing chasing at the current point is increasing.