Guide
Guest introduction: Dai Sujuan, founding partner of Entropy Research Consulting, has more than ten years of in-depth research and practical experience in the whole steel industry chain. He used to work for my steel and Yuanda Properties, and developed a number of inventory management and hedging systems for spot enterprises, which have served more than 60 large-scale domestic production and trading enterprises.
Core point of view: from the policy direction, it is definitely positive, but the sustainability is not necessarily strong, the main reason is that the current steel mills may continue to resume production, driving the supply and demand pressure of the finished product end to increase.
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This article comes from the sharing content about black breeds in the live broadcast of "Niu Zhuan Qian Kun" at night on 10.13.
On Saturday, the meeting of the Ministry of Finance was more content, but it can be summed up in one sentence: the direction is certain, and the process will take time.
The rebound since the end of September is mainly due to the very obvious reaction of the market after the country's policy came out.
The first is the stock index, and then the black commodities have a large number of short positions before the holiday, driving the rapid rebound of prices. In the process, the rise in spot is very obvious, but after the holiday, there is a certain amount of decline as a whole.
[Analysis of the driving force of the black series since September]
1. Finance-driven
In the course of this round, the first to become stronger is the financial drive. Financial drive actually refers to the resonance between the major types of assets, once this situation appears, it shows that the black must not follow its own fundamental logic, often the macro has undergone a particularly big change.
In the case of the CSI 300, for example, the stock index has risen very considerably. Looking at the trend of foreign commodities, with London copper as the target, it is also a strong trend before the National Day. The trend of domestic industrial products is also strong before the holiday. So not only the stock market, but also domestic and foreign commodities resonate before the holiday.
Since the United States began to raise interest rates in 2022, the monetary policy of China and the United States has been split, resulting in a narrowing of the interest rate gap between China and the United States and capital outflows. In this case, if the country increases the intensity of water release, it will increase the outflow of funds. Therefore, after considering the United States interest rate cut, the domestic policy pressure will be relatively small, and relevant policies will be introduced one after another.
At the same time, it is important to note that the RMB exchange rate, which appreciated significantly in the previous period and earlier than the time when the Fed cut interest rates. At first, it was expected, and after the interest rate cut, the yuan continued to appreciate. As a result, there are many fewer constraints to the introduction of domestic policies.
2. Industry-driven
The industrial drive remains positive, but the margin is weakening at present.
The relationship between supply and demand of finished products is not as good as the market price reflects. Although it has turned to a destocking cycle, it has fallen back in the past two weeks, and the strength index of supply and demand has fallen from a high level.
This week, the strength index of rebar supply and demand weakened, and hot coil also weakened.
Thread production has continued to climb in recent weeks and is already close to the year's highs.
Inventory situation, thread has turned into a weak accumulation cycle this week, but the hot coil is still a warehouse cycle.
The increase in finished steel output in the past two weeks is mainly due to the positive value of the industrial drive, which is reflected in the structure of the spot profit of steel mills. Therefore, the main factor for the marginal weakening of the current industrial drive is the increase in output on the supply side.
3. Cost-driven
The cost-driven relay remains strong for now.
In the process of this round of rebound, the cost-driven performance is relatively strong, which is consistent with the weakening factors of the industrial drive, the output has risen, and the demand for raw materials has increased. For example, the daily consumption of iron ore began to rise, the number of available days of total inventory decreased, and the inventory cycle turned into a destocking cycle.
At the same time, the inventory of coking plants has also fallen, and steel mills have begun to replenish their stocks. In addition, coking coal prices at home and abroad have increased to a certain extent in the past week, which has formed a certain support for coke prices.
All in all, although the increase in output has suppressed the supply and demand of the industry, the demand for cost has been pulled, so it has brought certain support to the cost side.
4. Basis driven
Basis drive remains strong. At the beginning of September, the basis of the thread 01 contract was 130, and now it has expanded, and the basis of hot coil has also expanded, almost flat.
Since the beginning of this year, the basis of the thread has been compressed to a very small level, although the basis drive has become stronger, but it is no longer available, and the impact of the previous high basis market is gone.
So this round of rebound is simply summarized: the financial-driven upturn is because China has chosen to introduce a large number of stimulus policies in a better time window, igniting the market's bullish sentiment.
In mid-to-late September, the relationship between supply and demand of finished products has improved, resulting in the recovery of steel mill profits and the expansion of output, resulting in certain support on the cost side. This was followed by cost-driven strength.
5. Industrial logic deduction (refer to the logic deduction on July 21, 2024, which is basically maintained for now)
From July to August, the macro financial sentiment has been repeated, the supply and demand of black varieties are in the off-season, the cost center of gravity has room to move downward, and the prices of various varieties continue to fall to the bottom. Production remained relatively low until there were bright spots on the demand side, mainly due to increased speculative demand due to improved confidence (7.21 tonnes of steel profit, reflecting everything and leading the market changes).
From September to October, the demand for finished products gradually rebounded, and the profit per ton of steel improved, but the resumption of steel mills may cause a second price adjustment, but due to the overall recovery in demand, there is still upward momentum after the price adjustment.
From November to December, the winter storage game market unfolded, and the logic of raw material winter storage replenishment will become the main driving force for the rise of the black series in this wave.
If this round of China's economic policy can be transmitted to the actual end, then black may also go through another round of upward logic. But it is still relatively conservative from a spatial point of view.
Back to the present, if this round of weekly levels rebounds like this, it may remain until the end of the year. There is a risk of a pullback in the first half of next year.
From the perspective of the daily level trend, the rhythm is still in a state of obvious expansion, indicating that the upward trend has not ended.
Before the holiday, we also paid attention to the fact that the stage high of this round may be from the first to the second day after the holiday, so we suggested that companies slightly reduce their inventories when they rebound to a high level before the holiday. Including the day before the opening of the market on October 7, because the spot market also rose in price during the National Day, it is also recommended that enterprises reduce their inventories again.
From the policy direction, it is definitely positive, but the sustainability is not necessarily strong, the main reason is that the current steel mills may continue to resume production, driving the supply and demand pressure on the finished product end to increase.
Therefore, we believe that this round of adjustment may be until late October, and there may be a better opportunity to replenish or track later. The above is a rough estimate, but operationally, please adjust accordingly according to the trend of the disk.