In May, the domestic construction steel market ushered in a rare surge in the market: in the first half of the month, the hype sentiment was concentrated and the steel mills fueled the flames, and the market quotation hit a record high; in the second half of the month, under the intervention of the policy, speculative funds quickly withdrew, and the spot. The price started to fall rapidly and completely swallowed up the previous cumulative increase.In May, the domestic construction steel market price showed a high and low trend, which was in full compliance with our early warning judgment last month, but the room for price fluctuations exceeded expectations, and the market reappeared the madness of 2008. From an objective point of view, this round of surge in the market has deviated from the fundamentals of supply and demand. While prices continue to rise, the speculative  atmosphere is unprecedentedly high, downstream users are overwhelmed, and some terminal projects are even forced to stop by high prices. Prosperity must decline, and material extremes must be reversed. Policy-based regulation has become the fuse for the high plunge.In addition, this month’s domestic construction steel inventory fell less than expected, especially after the surge in steel prices, steel mill inventory transfer encountered resistance, and factory inventory has risen.

After entering June, the fundamentals of supply and demand in the domestic market will change: on the one hand, the intensity of demand across the country will be seasonally weakened, especially in the southern region will usher in the rainy season, and terminal demand will be significantly suppressed; economic operations will return to normal, and the strength of steady growth may be.If there is a weakening, monetary policy will be fine-tuned, liquidity easing is difficult to continue, and downstream funds are not optimistic; after the adjustment of import and export policies, the momentum of large-scale steel exports is expected to slow down. On the other hand, the profit of steel mills has  been greatly  compressed recently, steel mills have stopped production, and their willingness to reduce production has increased. Overlapped regional power shortages and environmental pressures have made it difficult for crude steel production to continue to grow, and pressure on the supply side has also been reduced in the later period.

Therefore, we judge that there are signs of weakening at both ends of supply and demand in June.…m. It is worth noting that while the price of steel has fallen,the price of raw materials has also fallen, but the decline is lower than that of finished products. The current trend of raw materials is strong, which has a certain supporting effect on steel prices in the short term. As the center of gravity of steel prices moves downward, downstream pressures are eased. Once concentrated purchases occur, it will also lead to a technical rebound in steel prices.

On the whole, after experiencing the huge volatility in May, we judged the trend of domestic construction steel market in June 2021 as “two-way weakening of supply and demand, and price range fluctuations”-it is expected that the representative specification price of high-quality rebar in June.(Based on the Xiben Index), it may operate in the range of 4750-5300 yuan/ton.

                                                                                                                                                                                     Source: InSource: Invited Commentator on Nishimoto Shinkansen