Supply and demand pattern change and deductive process in the first half of 2019

1. Fundamental: The demand of the steel industry still has strong resilience, and the growth rate of steel demand has remained at a high level.

2. Demand side: Domestic demand In 2019, the growth rate of H1 steel will move downwards, and the transition will be smooth in 3-5 months. The export demand will pick up in the short term and remain low in the medium term.

3. Supply side: The upper limit of production is about 82 million tons, and profit has become a new factor affecting supply.

4, inventory: the central shift, 2019 winter storage inventory is expected to be the same as 2017.

5. The rate of destocking of total social inventory is significantly higher than that of the same period last year, and it is easy to usher in price increases.

6. Profit center: When the profit is less than 600 yuan/ton, it will affect the profit of the northern region and bring about a reduction in production. Especially when the current scrap price is high, the impact on the electric furnace may be even greater.

7. Price Center: In 19 years, the price center will be close to the 17-year level, at around 3,500-3,800 yuan/ton, and the profit center will be around 500-700 yuan/ton. Overall, it is more optimistic about the first half of the year, and there may be a decline in the second half.

Steel exports in January 19 have rebounded, but the space is relatively small.
The core factors affecting steel exports are policy factors and spreads at home and abroad. At present, the spread between domestic and overseas has been restored. However, due to the start of the construction season in March-April, steel companies may transfer foreign trade orders to the domestic market when they are unable to meet their demand, and at the same time drive the domestic and overseas spreads to return. We believe that export demand will pick up in the short term and maintain a central level of 6 to 7 million tons in the medium term.

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