The steelmaking market may be shaking narrowly in February

Last week (January 14 - 18), the domestic steel market shook narrowly. Industry insiders pointed out that with the approaching of the Spring Festival, the market performance was cold, and steel traders' quotations rose and fell. Overall, the downward space of the steel market is relatively limited, and the trend of narrow-range shocks may be maintained in February.

From the macro level, the policy "warm" wind continues. Xu Honghong, Assistant Minister of finance, said that this year the policy of inclusive tax relief for small and micro enterprises would continue to be promoted; Lian Weiliang, deputy director of the National Development and Reform Commission, said that investment in infrastructure should be increased; Zhu Hexin, deputy governor of the Central Bank, said that adequate financial support should be provided for the real economy. At the beginning of January, the People's Bank of China decided to reduce the reserve requirement ratio of financial institutions by 1 percentage point. On January 17, the People's Bank of China launched a counter-repurchase operation of 400 billion yuan by means of interest rate bidding. This will be beneficial to the operation of the steel market.

From the aspect of inventory, the cycle ratio and month-to-month cycle ratio of major steel social stocks in key cities in China have increased. Monitoring data show that as of January 18, the social stock of steel products in 29 key cities has reached 9.2403 million tons, an increase of 406.1 million tons over the previous week, an increase of 13.525 million tons over December 2018, which is basically the same as the same period last year. This means that supply pressures will increase in the later stage of the market.

From the point of view of terminal demand, data from the National Bureau of Statistics show that in December 2018, China's manufacturing PMI (purchasing manager index) was 49.4%, down 0.6 percentage points from November, and has fallen below the "prosperity and decline line". In addition, due to the influence of off-season, steel terminal demand tends to stagnate after entering winter, coupled with speculative demand because steel prices exceed TRADERS'expectations and delay in releasing, short-term downstream demand has "hidden worries". Although a large number of investment projects such as rail transit construction, railways and inter-city railways have been approved, which has brought certain space for steel demand, it still needs some time to release the demand.

On the export side, due to the global economic slowdown and trade frictions, steel exports can hardly recover. But as domestic steel prices fall to a low level, it will stimulate the export efficiency of relevant enterprises, so steel exports will not fall sharply, which is expected to be the same as the same period last year.

Overall, terminal consumption stagnates and downstream delivery is cautious. It is expected that the steel market will maintain a narrow fluctuation trend in February.