Introduction to Basic Knowledge of Hot Rolled Coils (VI) -- Main Factors Influencing the Price Change of Hot Rolled Coils

I steel products The relationship between market supply and demand determines the price trend

The relationship between supply and demand is the most important factor determining the long-term price trend. Before 2008, there was a strong demand for hot rolled coils in China. At the same time, hot rolled coils had high requirements for production technology. At that time, only a few large steel plants were able to produce, and the number of production lines was small. The market supply capacity was very limited. Therefore, the market price of hot rolled coils was generally higher than that of deformed steel bars wire rod And other construction steel prices.

With the rapid growth of domestic hot rolled coil production and the easing of the contradiction between supply and demand, the market price gap with other varieties gradually narrowed. Especially after the 2008 financial crisis, China's large-scale investment has driven the growth of demand for deformed steel bars and wire rods, and the average price of deformed steel bars began to be higher than the average price of hot rolled coils.

After 2012, with the increasing overcapacity of deformed steel bars, the prices of deformed steel bars and hot-rolled coils began to approach gradually. In 2013, the annual average price of hot-rolled coils was again higher than that of deformed steel bars.

2、 High and low points of upstream and downstream cost constraint prices

The relationship between supply and demand determines the price trend, and the cost determines the upper and lower limits of steel prices. The cost of the downstream industry determines the upper limit of the steel price. When the cost of the downstream industry can no longer bear the rise of the steel price and there is a loss, the market price often turns from rising to falling; The average production cost of the steel industry determines the lower limit of the steel price. When steel mills generally suffer losses, there is little room for the steel price to continue to fall.

3、 The domestic market capital supply affects the steel price level

When the market capital is relatively sufficient, it usually corresponds to high prices, while when the capital is relatively tight, it often corresponds to low prices. Taking 2011-2012 as an example, as banks' loans to the "two high and one capital" industry tended to be cautious, the capital of the steel industry was generally tight, which became the main influencing factor for the low price operation of steel.

4、 Market Impact of Adjusting Ex factory Price of Large Steel Plants

The sales radius of hot rolled coil is relatively large, and the product concentration is higher than that of construction steel. In addition to the price policy of local main guide steel plants, the market parties will also pay attention to the adjustment policy of ex factory prices of large steel plants. For example, the sales areas of Shagang and Rizhao are mainly in East China, and they are the leading steel mills in the region. However, local steel traders also care about the ex factory price adjustment policies of Baosteel, Ansteel, Wuhan Iron and Steel, and Hebei Iron and Steel. In particular, the price policy adjustment of Baosteel has played a very significant role in guiding other steel mills and the market.

5、 Market expectation plays a boosting role in price rise and fall

The change of market expectation will boost the rise and fall of prices by changing supply and demand and market funds. If the market expects the price trend to rise in the future, traders and downstream enterprises tend to place more active orders and increase inventories, stimulating the further rise of market prices; vice versa.

6、 Influence of financial market on steel price

Since the listing of rebar and wire rod futures, the financial attributes of China's steel products have initially emerged. The futures market and the spot market are increasingly closely linked, and prices affect each other. In other words, the spot market reflects the changes in the current market situation, while the futures market reflects the future expectations, and forms a mutually restrictive balance with the spot market. Futures prices have also become an important factor for steel mills to consider in pricing. From the perspective of rebar futures and spot market price trends, futures prices and spot prices have a strong correlation. See the figure below.