Energy saving and emission reduction, tightening domestic steel supply and demand, rebar, rising against the market

Recently, the commodity market has been in a downturn, and rebar has been relatively outstanding in the weak market, rising for two consecutive trading days. The impact of energy saving and emission reduction in the early stage and the high raw material prices all supported the rise in steel prices. Due to the good overall fundamentals, the rebar market is still prone to rise and fall, or it will move out of the volatility.


Energy conservation and emission reduction make steel supply and demand tighter
As most commodities moved sideways, rebar futures appeared to be more resilient, out of the market for two consecutive trading days. On the 24th, the rebar 1105 main contract rose 1.80%; on the 25th, the rebar 1105 main contract opened at 4,701 yuan, the highest price was 4,738 yuan, the lowest was down to 4,680 yuan, and closed at 4,683 yuan / ton, compared with the previous trading day. The price rose by 43 points, or 0.93%, with 1,677,500 contracts and 30,326 contracts to 758,500 contracts.

The limited production of electricity has tightened the relationship between supply and demand of steel, resulting in a firmer steel price. Due to the impact of the pre-term limit on electricity production, steel supply pressure has been alleviated. The limited production of electricity is mainly concentrated in Hebei and other places, which makes the supply of steel in North China tight, which leads to limited resources in the south, and the supply in East China and other places is also tight.

The main reason for pushing the rise in steel prices is that the current spot market sales are good. Energy-saving and emission reduction has significantly eased the supply pressure. Some market resources in the north are tight. At present, the social stocks in key domestic markets have basically dropped to the level of the beginning of the year.

From a fundamental point of view, the output of crude steel is decreasing day by day, and the adjustment of the steel industry structure by energy conservation and emission reduction has begun to appear. From the long-term trend, the decline in supply is a foregone conclusion. Next year, the country's investment in infrastructure high-speed rail projects will continue to maintain rapid growth. The major steel mills remain optimistic about the market outlook. Steel prices will continue to rise at the bottom next year and fluctuate upward.

In addition, from a macro perspective, Bent Futures analyst Liu Mingliang said, "After the Chinese central bank's two-way deposit reserve, the bearish cash, the strong rebound in the stock market on the 24th showed signs of stabilization, driving the popularity of commodities and rebar to follow."

High raw material prices support steel prices
In addition to the tight supply and demand caused by energy conservation and emission reduction, high raw material prices have also become one of the factors supporting steel prices. The Indian government has imposed an export tax on iron ore, which has been raised from the initial 5% to the current 25%. As a result, India’s iron ore exports to China decreased sharply in October, a 39% decrease from the previous month, while Australia’s exports to China. The iron ore has also been reduced by 20% from last month, which makes the price of imported ore very strong, and also promotes the maintenance of domestic mines.

At present, the price of raw materials is firm, which has a favorable support for steel prices. Therefore, in the systematic decline in the past few days, steel futures have shown strong resilience.

Strong raw material prices are one of the important factors supporting steel prices, and there may be a big wave of rebar before the peak season. Because the supply is not up in the short term, and the consumption is good; and the thread price is lower, the upside is large.

For the trend of rebar in the market, the possibility of “shocking up” is greater. Last week, although the rebar was drastically driven by the macro level, the basic surface of the thread remained relatively good. From the perspective of the 1105 main contract, the last week's exploration to the vicinity of 4500 has reached the previous market launch interval, in the fundamentals. In the absence of significant negative circumstances, it has not supported a substantial downswing. However, analyst Bai Jing also mentioned that energy conservation and emission reduction will come to an end in December, and as the demand weakens in the middle of next month, there may be a certain correction in rebar.

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