Steel prices plummeted

In the spot market, this week, the steel market showed a cliff-like decline. The biggest drop in a single day was as high as 200 yuan/ton, and the cumulative decline was over 500 yuan/ton. Both steel mills and market quotations swiftly fell.

"There are many uncertainties in the big environment, and the steel traders have a rising panic in the market. Therefore, even if they are seriously losing money, they choose to close their positions to avoid risks." Fan Li, a steel analyst at Jinlian, said.

The short-selling sentiment in the steel market is not unfounded. Fan Li analysis, first of all, this year's heating period steel market intervention has slowed down, did not adopt a "one size fits all" policy, but adopted a flexible peak production program. Even if the mainstream steel mills have a strong limit on the production of blast furnaces, the supply of finished steel products will not be significantly reduced. Therefore, the policy of this year's heating season is basically frustrated. Secondly, with the cold weather, the demand for construction sites in the north decreased, coupled with the limited start of rain and snow, the northern steel enterprises increased the freight volume in the south, and the pressure on the northern stocks gradually shifted to East China and South China. Due to the large difference between the north and the south, the East and South China regions bear Double-layer pressure on inventory recovery and low-price shock. “In the context of normal supply and reduced demand, the next step in stock recovery will be the biggest constraint in the market.”

CITIC Futures Research pointed out that the spot price of steel in various regions is running smoothly and the volume of transactions continues to recover. This week, total steel inventories increased slightly, and inventory inflection points appeared. However, this is fully expected in the market. Steel production fell across the board this week, with a drop of about 1.5%. The supply side began to have marginal support. The steel decline is expected to slow down and turn into a low shock.

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