Since mid-to-late December 2017, the price of steel has been on a continuous decline mode with a larger decrease. Data monitoring showed that as of January 8, the average price of Grade 3 rebar was RMB4,158 / tonne, down 57 yuan / ton from the previous trading day and down 230 yuan / tonne in the week. Among them, Beijing, Tianjin and other places prices fell below 4,000 yuan / ton.

 

The industry said that winter is the off-season steel consumption, coupled with the winter stock market failed to start, the market demand dropped significantly. The blast furnace operating rates and steel stocks continued to rise, resulting in steel prices fell in 2018 started. However, as steel prices continued to fall, the timing of winter storage was gradually approaching.

 

Changes in supply and demand environment

 

Data show that as of January 5, 2017, the Composite Price Index was 163.2 points, down 1.89% over the previous week; the long product price index was 174.6 points, down 3.41% from the previous week; sheet price index was 151.8 points, down 0.69% .

 

Analyst Ma Guanghui said steel supply and demand environment has changed, falling market and market expectations. From the pattern of supply and demand, the market adjustment or just started.

 

In terms of demand, at present, the demand for winter trade storage by steel traders and the demand for winter storage production by terminal enterprises are not released. Although the demand for winter storage always exists, but hold a strong atmosphere of waiting to see the currency, hoping to hoard low prices. The price continued to fall, making the winter reserve plan continued to postpone.

 

Despite continuous plunge in steel prices, the profitability of private-owned steel producers is still considerable, and manufacturers are more active. Since the beginning of this year, some blast furnaces have resumed production and the utilization rate of blast furnaces has rebounded slightly. As of January 6, 2018, the operating rate of blast furnaces for 100 small and medium steel enterprises in Lange Steel reached 71.34%, up 0.82% from the previous week.

 

Demand is not satisfactory, operating rate rise, making steel stocks rising. As of January 5, 2018, the stocks of steel in 29 major cities nationwide were 7,146,100 tons, an increase of 348,100 tons or 5.12% from the previous week. From the current situation, steel stocks and social stocks rose for three weeks in a row, especially in long-term stock pick-up significantly.

 

Ma Guanghui said the market into the off-season, due to worry about bargain-hunting copied in the "half-hillside", construction and manufacturing enterprises purchasing demand dropped significantly. In the meantime, there is not much room for a drop in operating rates for steel mills. In the short term, the market correction may have just started, but a technical rally may occur after it is oversold.

 

Winter storage quietly open

 

As steel prices continued to fall, some steel traders quietly opened the winter storage process.

 

A steel trader on the China Securities Journal said that "the target price is wire 3800 yuan / ton, round 4,000 yuan / ton, the current price is close." The company decided to start winter storage in late January. The above-mentioned people stressed that optimistic about the first half of the year, the spot price may reach 5500 yuan -6000 yuan / ton.

 

However, the announcement of a new regulation on capacity replacement made the market appear variable. According to the regulations, the Company should include the production capacity of steel de-capacity tasks, enjoy the exit capacity of subsidies and policy support, the production capacity of "strip steel", backward production capacity, capacity of demolished main equipment before replacement, smelting and other non-steel smelting Equipment capacity, shall not be used for replacement.

 

Affected by this, futures prices rose sharply. Analysts Horsepower said that the new regulations triggered a rebound in the futures prices, mainly due to the market worried about the 2018 steel production growth, while the new capacity replacement program weakened this concern. Customers considering the recent winter storage may be shot, the downward trend in spot prices may be weakened. The above-mentioned steel trader said that according to changes in the market conditions to establish stock in batches.