The long-term demand of the steel market is expected to become worse, while the production limit in the heating season this year is more relaxed than that of last year, the decline of steel inventory has slowed down, and the steel price has fallen from a high level, thus driving the collective adjustment of ferrous metals.
1、 The demand for steel is getting worse, and the high price of steel is under pressure
The cooling signal of China's property market is becoming clearer. In October, the turnover of the real estate market in many places continued to be low. In October 2018, the turnover of second-hand houses in 10 monitored cities including Beijing, Hangzhou, Shenzhen, Chengdu, Nanjing and Suzhou was 39000, a quarter on quarter decrease of 25% and a year-on-year decrease of 9%. In the past four months, the transaction volume of the property market in the above 10 cities has been in a continuous downturn. Excluding the months of changes in the transaction volume of second-hand houses during the Spring Festival holiday, the transaction volume of the property market in the 10 cities hit a 48 month low. Along with the decline of real estate turnover, land transactions also turned pale. According to the Report on the Land Market of 40 Cities in October 2018 issued by E-House Research Institute, from January to October 2018, the cumulative income of land transfer fees in 40 typical cities monitored by E-House was 1801.9 billion yuan, a year-on-year decrease of 0.5%, which was the first time that the land market turned negative year-on-year since the beginning of 2016, so the land market also dropped significantly.
Coincidentally, the automobile market has entered a cold winter. According to the data of the China Association of Automobile Manufacturers, in September 2018, the car production fell by 11.7% year on year, and the car sales fell by 11.55% year on year. In October, China's auto market turned downward more obviously. According to the news released by the National Passenger Car Market Information Joint Conference, the overall sales of passenger cars in October are expected to decline by about 20%. To make matters worse, while the sales volume declined, the inventory level of dealers also reached a historical high. According to the data released by the China Automobile Circulation Association, the inventory early warning index of auto dealers in October was 66.9%, up 17 percentage points year-on-year, the highest in three years. This is the tenth month of this year when the inventory early warning index exceeded the warning line.
In the short and medium term, the inventory changes have a certain guiding effect on the steel price. As of this week, the stock of steel traders and steel mills has still declined, but the extent of decline has declined. Last week, the total stock of traders and steel mills has declined by about 700000 tons, and this week, it has only declined by about 400000 tons. Entering the heating season, although the supply will decline in the future, the demand will also enter the slack season, and the supply and demand will be weak in the future. Therefore, this year's "winter storage" situation will determine the future trend of steel prices. At present, because the spot price is at a historical high, the market is not optimistic about future consumption, so traders are unwilling to purchase at this price, and the high steel price is under pressure.
2、 The steel plant began to reduce production, but coke Inventory is still falling
In November, the enterprises in Beijing Tianjin Hebei region that had previously expected to implement production reduction gradually implemented, and the overall supply of steel declined. According to the MYSTEEL survey, the blast furnace operating rate of 247 steel plants this week dropped 0.7% to 79.44% month on week, and the average daily molten iron output has not been affected, at a high 2.285 million tons. With the implementation of heating season policies and the impact of entering the Expo, it is expected that the maintenance situation will continue to increase next week, and the hot metal output will continue to decline. Although the output of molten iron will decline month on month in the future, the coke inventory of the coking plant will still fall. By the end of this week, the coke inventory of 230 independent coking plants had dropped to 483300 tons from 521000 tons last week. The port inventory remained unchanged at 2.462 million tons, and the steel plant coke inventory rose to 4.283 million tons from 4.269 million tons last week. On the whole, the steel plant is active in stock keeping of raw materials, and the available days of coke in the steel plant are at a high level. At the same time, the inventory of the coking plant is at a low level, and the overall inventory is low. On the whole, the supply side coke enterprises have begun to implement production restriction in heating season in some regions. The demand side short-term traders and steel mills still need to purchase. There is a time difference in short-term coke steel production restriction, showing a decline in supply and stable demand. It is expected that the short-term spot price of coke will remain stable and strong, The medium-term trend needs to continue to pay attention to the implementation of production restriction measures in the heating season and the subsequent replenishment dynamics of traders.
3、 The spot price of coke is firm
Recently, the coke market has risen about 300 yuan for three consecutive rounds. The spot price of coke across the country is strong and sales are good. However, the market's expectation of future steel terminal demand is worse, so the forward price is under pressure. However, the current contract is relatively small supported by the spot. The basis difference of coke is about 200 at present, which is on the high side.
4、 Trading strategy
J1901 contract callback is in place, rebound operation can be considered. The entry point is 2280-2320 yuan/ton, the stop loss is 2240 yuan/ton, and the target is 2400 yuan/ton.
BOC International Futures Team 2
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Editor in charge: Song Peng
