From the point of view of confidence, everyone speculative trading enthusiasm needs to be restored. In the case of fundamentals much better than the year before, April 28 steel prices were 1153 lower than the year before, thread and hot rolled prices were 1210 and 1124 lower, which shows how weak market confidence is. April 28 steel Lianlian announced most varieties of sentiment index is still very depressed. An important intuitive indicator that affects everyone's enthusiasm for trading is inventory change, and everyone is used to paying attention to small samples. Steel union small sample 5 varieties of social and steel inventory decline to reach 400,000 tons or more, if the continuous 2~3 weeks such a large decline, will be favorable to boost market confidence, the bottom of the market stage is expected to form. In other words, the country, many varieties of broken specifications, is also expected to boost everyone's confidence. Three years after the outbreak of the first small holiday, we relax mood to experience life, feel the family, work is supplemented, no accident, small holiday is a tired library, but will be reduced production effect to a certain extent hedge, last year 5.1 thread inventory only increased 55,000 tons, the total inventory of five major varieties only increased 280,000 tons, also does not rule out the possibility of this year. The recent frequent news of production cuts is conducive to further reducing the fundamental pressure (the reduction of inventories in May May exceed 1.5 million tons), and help rebuild market confidence. To some extent, the overfall combined with the small holiday (replenishment before and after the holiday, and no futures trading during the holiday), there will be some confidence improvement, although the rebound of steel prices is a few days late, but there will be.
From the point of view of supply and demand rebalancing, the reduction of production should achieve quantitative change leading to qualitative change. This variable is mainly observed daily molten iron production. According to the survey data, the production cut in Shanxi affects the average daily output of molten iron about 46,500 tons (52,500 tons of steel), the average daily output cut in Shandong steel plant is about 11,300 tons, and the average daily output cut in Sichuan-Chongqing steel plant is also more than 20,000 tons, Hubei steel plant only mentions the diversion of resources, the northeast steel plant is also the same. As of April 26, there are more than 40 steel mills issued furnace, overhaul, production reduction plans. The average daily output of molten iron in the week of April 27 is 2,435,400 tons, which is expected to be at least 2.33 million tons or below (the average output of molten iron in June and July last year) before a solid and sustained rebound in steel prices is expected. Obviously, the current production reduction of these steel mills is not enough, and I define this round of production reduction as "squeeze toothpaste". If this is the case, steel prices cannot be expected to stop falling completely.
In a word, the steel market in May, negative feedback is still to be fully released, the stage of pessimism is still lingering shadow, only the fundamental rebalancing, quantitative change leads to qualitative change, market price overfall, in order to usher in a real sustainable rebound. With no improvement in demand expected in May, the only way to repair prices and profits is through supply-side cutbacks -- further sustained cuts in production by steel mills. In terms of operation, we can choose to cancel the set of insurance policies or speculative empty orders suggested in the middle of March, and even establish virtual inventory on the disk when the market is low. Traders and terminals can replenish the stock flexibly when the market is low.
