Thread output is high and downstream construction site demand

Viewpoint: The thread production is high, and the demand for downstream construction sites has not erupted. Inventories are accumulating as scheduled, which suppresses prices .

Compared with the winter storage inventory in previous years, the thread before the Spring Festival is still in the historically low inventory range, but due to the continued high output this year, the consumption stagnation during the Spring Festival will all accumulate into inventory, resulting in a sharp increase in inventory pressure after the holiday, which has now reached The level of the same period last year has increased the challenges for subsequent terminal consumption. Based on this, we believe that there is a pullback momentum for short-term threads under inventory pressure, but considering that demand will reverse pessimistic expectations once it is initiated, it is recommended to buy after dips, and layout demand will burst.

Risks: Changes in production restriction policies and a sharp drop in downstream demand.

Judging from the stock accumulation situation in the past three years, the total stock accumulation cycle is about 11-12 weeks, and the average daily accumulation range is about 1%.

According to the previous law, it is normal for the growth rate to increase significantly during the holiday period. Last year, the total inventory of the week after the Spring Festival was about 6.69 million tons, and the two weeks after the holiday was a time of substantial accumulation.

At present, the total inventory has accumulated for 63 days (week 9), and the cumulative amount has reached 12.64 million tons, with an average daily accumulation rate of up to 1.65%, even exceeding the 18-year level, and inventory pressure has increased significantly.

Due to the fact that some of the electric furnace output has not yet been resumed, and the impact of continuous rainy days in many places, the overall release of terminal demand is also lagging. It is expected that the accumulation will continue to accumulate in the next 1-2 weeks, but most terminals will also start construction next week Therefore, the accumulation rate in the later period is expected to slow down.

Especially after entering March, the coil factory's maintenance has increased, coupled with the recent improvement in exports, the supply pressure is expected to ease.

In the year when the average daily accumulation rate is higher than 1.4%, the probability of the futures price falling during the accumulation period is generally greater. It is estimated that this week's thread accumulation rate has significantly exceeded the previous year's average level, reaching a growth rate of 2.32%, the holiday production decline is limited, and later faced with the re-release of electric furnace production, inventory pressures increased, and the pressure on future price increases.

After the hot coil profit rebounded slightly, the output increased quickly, and the overall pressure was not small, but compared with the thread, the inventory growth rate was still slightly lower.

In summary, from the current situation, the accumulated stock in winter will not be too low, but it is not yet known when the demand will start, and it is expected that this year ’s demand will no longer form an explosive growth, but a relatively stable release, so the focus will be on the latter Need to transfer to the library rhythm.

Calculated from the total steel inventory, the current average daily growth rate of 1.65% for another two weeks, the total inventory will accumulate about 15.5 million tons, which will exceed the level of 14.9 million tons in 18 years.