Second-quarter cold rolling market may continue to explore low

In view of weak demand for rigid products, sustained high-speed steel plant production release, and continued negative pressure from a number of factors, such as the macroeconomic side, this year, domestic steel market prices have not been able to escape the downward trend. Mainstream products represented by wire rods, rebars, and hot-rolled coils have generally fallen by more than RMB 400/t since late February, and the prices of hot-rolled coils have fallen by more than RMB 500/t. In contrast, the performance of cold-rolled coils is much better, and the decline is significantly slower than the above-mentioned varieties, with a drop of around RMB 300/t. So why is the cold rolling market better than construction steel and hot rolled coil? Can this advantage continue?

Cold-rolled coil stocks are under light pressure This year, the output of cold and hot-rolled products both increased, and both hit record highs in March. Based on the data from 2012 to the present, the output of cold-rolled coils rose from 4.488 million tons in January last year to 5.903 million tons in March this year, an increase of 1.415 million tons, an increase of 31.53%. The hot rolled coil increased from 12.84 million tons to 15.62 million tons, an increase of 2.78 million tons, an increase of 21.65%.

In recent years, hot-rolled products have been suffering from overcapacity. In contrast, the production base of cold-rolled coils is not large. Although the increase is higher than that of hot-rolled coils, the pressure is not as high as that of the hot-rolled market.

In terms of inventory, the inventory of hot-rolled coils and construction steel has been in a downward trend since 2012, and fell to a low level at the end of the year. Since 2013, inventory of hot-rolled coils and construction steel has increased. Since March, with the increase in the operating rate of outdoor projects, the market inventory has declined, but it still exceeds the 2012 high level. In terms of HRC, it has hit new record highs. The current inventory level is approaching the highest level in April 2011. The CRC coil inventory has been controlled within 2 million tons in the past more than a year, and the fluctuation is very gentle. Relatively speaking, the inventory pressure is lighter.

From the perspective of output and inventory trends, the supply pressure of cold-rolled coils is significantly smaller than that of hot-rolled coils.

Demand for automobiles and appliances rebounded year-on-year The automobile and home appliance industries were the major users of cold-rolled products. Since 2013, China's auto production and sales volume has steadily risen. According to data from the China Association of Automobile Manufacturers, in March 2013, China’s auto production and sales both exceeded 2 million, a record high. From January to March, the production and sales volume of automobiles reached 5.3991 million vehicles and 5.4245 million vehicles, respectively, an increase of 12.81% and 13.18% year-on-year respectively. The booming production and sales of automobiles have greatly boosted the confidence of the cold rolling market and accelerated the consumption of market resources.

The output of home appliances also showed a trend of increase over the same period of last year. From January to March, the cumulative output of color TVs in China was 28,788,000 tons, an increase of 1.4% year-on-year; the output of refrigerators was 21,526,000 tons, an increase of 9.0% year-on-year; the output of washing machines was 16,011,000 tons, an increase of 7.7% year-on-year; the air-conditioning output was 34.9 million. Ton, an increase of 5.3% year-on-year. With the gradual increase in temperature, air-conditioning manufacturers have increased raw material procurement efforts to deal with the upcoming air-conditioning sales season. At the same time, benefiting from the policy of saving energy and benefiting the people, the sales volume of home appliances in China has increased significantly this year. According to statistics, in the first three months of this year, the volume of retail sales and retail sales of color TVs in the domestic market have increased by around 40%. The overall production and sales volume of the household appliances industry has greatly increased the resilience of cold-rolled steel prices.

In contrast, the demand for construction steel is pale. Affected by the abnormal weather this year and the new “National Five” factors, the construction progress of the construction industry is slow, and the release of construction steel demand has been affected. Since April, the transaction volume of the national property market has fallen month-on-month. The area of ​​new real estate started in March has dropped by a significant 20.2% year-on-year, and the consumption rate of construction steel stocks has slowed down significantly.

The "reservoir" function is relatively stable In addition to the terminal demand, the intermediate demand for hot rolled coil has played a role in fueling the rising market in previous years. However, according to market feedback, with the weakening of terminal demand in the past two years and the steel trade credit crisis that erupted in Shanghai and other places last year, the intermediate transaction in the HRC market has been greatly reduced, and the demand in the middle has been overshadowed. "The effect diminished. The intermediate demand in the cold rolling market has been relatively stable. Although the bartering behavior between businesses has cooled down since last year, there has been no significant drop in the situation. Merchant feedback has little impact on the overall demand, not on the market. The market caused a greater negative impact.

However, compared to the peak season in previous years, this year's "Jinsanyinsi" is expected to fail so that the downstream manufacturers wait and see mood is stronger, the procurement plan has been postponed. Given the weaker economic outlook in the second quarter, the downstream industry’s demand is expected to be flat and the market’s boost will be weak. Moreover, the output of steel mills will hit record highs in March, and the shipments of steel mills will remain high in the later period. After the price reductions, supplements, and preferential increases in steel plants, the low cost of late arrivals will have an impact on market prices. In addition, the current price gap between hot and cold rolled products has reached nearly 1,000 yuan per ton, so it is expected that there will be further room for further decline in the prices of cold rolled steel.

Taken together, the advantages of the cold-rolling market in the second quarter are difficult to maintain or will continue to be low.