How cold steel prices in the property market hit winter?

City Round Table Steel

Current guests:

Assistant Director of the New Lake Institute, Weng Mingxiao

Assistant Director Xie Zhaowei of China Great Wall Institute

Earth ** senior steel researcher Sun Zhisheng

Founder Senior Researcher Chen Ge

Greene Beijing R&D Training Center Han Jing

Jin Rui** Steel Researcher Xia Youjun

This year, the “unprecedented” real estate market has experienced a rare downturn in the past 10 years, and it seems to be intensifying. According to the latest data, in October 2011, of the 70 large and medium-sized cities, there were 34 cities with lower prices compared with the previous month, and 20 cities with flat cities. As the decline in real estate prices continues to expand and deepen throughout the country, it has directly caused the upstream and downstream industrial chains to enter a long cold winter period, and the steel market is one of its “hardest hit areas”. The current round of the city round table invited senior analysts from the steel city to discuss this.

Moderator: The current real estate market "sag" is at the head, the overall structure of "price cuts" has been formed, the project price cuts from "dark drop" to "bright drop", and even more and more developers began to resort to "redemption" "The difference" killer, trying to break the low transaction difficulties. Can the guests discuss in detail, the property market price increase is expected to increase from the construction costs and other aspects of the steel market will have what effect?

Sun Zhiyu: As we all know, the sharp drop in housing prices has a greater impact on real estate development and investment. The main impact point is the construction cost, which is one of the important components of its cost. According to our understanding, general high-rise buildings use about 80 kilograms of steel per square meter; multi-storey buildings use 50-60 kilograms of steel per square meter; 6-8 floors of small high-rise buildings consume 58-65 kilograms of steel per square meter. Between (55 square meters). Therefore, if the price per square meter falls by 10%, the reasonable price of a one-ton rebar that real estate developers can afford should be around 4050 (calculated at a historical average price of 4,500 yuan/ton). Judging from the current thread prices in the market, it is still more consistent with the projection of this value.

It can be seen that the domestic housing price trend is a key variable affecting steel prices. Individuals believe that the decline in housing prices is a good thing for the benefit of the country and the people. Let the bubble-filled real estate market return to rationality is what ordinary people long awaited day and night. The continuous and weak oscillation of steel prices, and the continued weakness of prices in the long-term future are the result of this, and the price of the property market is gradually deepening. The “cold winter” of the steel market will also be extremely long.

Chen Ge: This is an undeniable negative for the building materials market, at least for the mentality of steel companies. In the medium to long term, this kind of shock wave will gradually appear in the steel market, and its impact is inevitable. As for the extent of the impact, it is necessary to look at the situation of “price reduction of the property market” and the actual pulling effect of the construction of affordable housing on building materials next year. Observed.

However, in the short term, housing prices have started to decline since the highs. Developers are generally pessimistic about the market outlook, and their willingness to start new construction is declining. In the future, housing starts and construction will decline further. In particular, the recent cold wave has swept across the country, and the northern regions where temperatures have plummeted, and the cold and cold regions of the country have not had much rebar consumption capacity. In most parts of the South, the majority of projects have entered the end of the year due to the approach of the end of the year. Look, the winter demand for rebar has not really come yet.

Moderator: The current domestic real estate companies are particularly nervous about the capital side, and the tightening of the banking ** is to make it worse, some small developers are on the verge of bankruptcy. What is the fundamental situation of the current steel market?

Weng Mingxiao: The recent domestic housing prices have been significantly loosened, and housing sales have also been deteriorating. This has greatly affected the current market demand for rebar and market mentality. As for the steel mills, most steel mills faced losses due to the rapid decline in steel prices in the previous period and the maintenance of high costs. At the same time, most mills in North China have adopted a pace of production adjustment to reduce production, as steel mills have also clearly felt the weakening of market demand. However, when the iron ore spot ore price was at a low level, the steel mills actively procured to lower the average inventory price. At the same time, the rebound of steel prices in November also eased the pressure on the steel mills to a certain extent. Therefore, if the steel mill turned losses in the later period, In earnings, the output will recover.

For traders, due to the overall weakness in the outlook, coupled with high cost of capital, there is generally no willingness to take the initiative to sell goods, and more are actively shipping to reduce inventory to reduce risk. At the same time, as the weather turned cold in the later period and the Spring Festival approached, traders in North China at least had a monthly capital occupation cost of about RMB 50/tonne. If the goods are currently sold to the Spring Festival, the cost will be at least RMB 200/tonne, but trade Businessmen are not expecting a rise in the price of steel after the Spring Festival, and they will have to wait for the Spring Festival after the Spring Festival. Therefore, from the perspective of traders, this year's winter reserve market is difficult to show performance, the intermediate demand will be significantly inhibited.

As the weather turns cold and the Spring Festival is approaching, construction sites will be suspended one after another, and market demand will gradually weaken. In addition, the shift in the focus of cost and the possible resumption of production in steel mills will aggravate the imbalance in supply and demand.

Sun Zhibiao: As a complete industrial chain - real estate developers, steel traders, steel mills, the capital side of the crack is not only limited to real estate developers, but also to the steel traders and steel mills, some steel traders have been reluctant to purchase , Supply, for the future of the industry is not optimistic about the loss of high-priced goods in the previous period, the demand for steel has plummeted. Due to the current off-season stage, most of the projects have been suspended under the constraint that the weather has continued to turn cold. Procurement stocking before the next year is more likely to be constrained by funding constraints and it is difficult to get rid of this situation. It is expected that the domestic construction steel market will be in demand in the later period. It is still difficult to see a significant change.

Moderator: In addition to the downturn in the real estate downturn on the steel market, ladies and gentlemen, what factors are currently constraining the steel price? How do you view the steel price outlook?

Han Jing: Rebar is mainly used for both real estate and infrastructure construction. On the one hand, the real estate industry encounters a "cold winter" and the demand for rebar has dropped significantly. On the other hand, the investment in infrastructure construction in the second half of 2011, especially the construction of railways, has significantly increased. Fall back. From January to June, the investment in railway infrastructure construction showed a year-on-year growth, but it began to decline year-on-year from July. From January to October 2011, the railway investment in fixed assets decreased by 25.2% year-on-year. Since June, railway fixed asset investment has been declining month by month, and the decline has significantly increased. In August, the railway monthly investment dropped by 54.29% year-on-year. In October, the monthly railway investment dropped by 74.56% year-on-year. Some projects were postponed or permanent. Sexual shutdown. The downstream demand for rebar contracted and shrank during the quarter, which significantly weakened the support for steel prices.

In addition, as industries such as automobiles, home appliances, and machinery downstream of steel, the use of sheet metal as the main factor and the use of rebar are not directly used, but the iron and steel industry itself is a prosperous and glorious one, and both losses and losses result. Although the market will experience long-strength sheet weakening, or weak long products, the long product price will have a strong correlation with the board price. Machinery, shipbuilding, and the automotive industry will also indirectly affect the screw thread. The trend of steel prices.

Moderator: The impact of property price cuts not only exists in the physical market, but also spread to financial markets. Prices and stock prices began to adjust almost at the same time last year. The winter of the steel market also followed. Market participants believe that the “3” era has come. Can distinguished guests analyze the market outlook of steel prices from the perspective of market technology analysis? How can steel companies use the ** market for winter?

Xia Youjun: From the technical analysis point of view, from the K line of the rebar of the previous period, there was almost no decent rebound. The four-monthly K-line also shows the weakness of rebar. In addition, the moving averages also show short positions. Therefore, from the technical point of view, Shanghai Iron and Steel has shown a clear pattern of weakness, investors should maintain short-term thinking, not easy to bottom.

The majority of entity companies should decide the hedging strategy based on their actual business conditions. As the iron and steel products will operate in a meager state for a long time, it will be difficult for the mid-to-downstream companies to obtain high profits. The sale of value-reserving companies (especially some steel companies with cost advantages) can be relatively positive and need not be excessively “tangled”. **The premium. Enterprises that have two-way risk exposures should also maintain two-way hedges to lock in intermediate profits. The operations of buying hedge companies (such as downstream demand enterprises) should be relatively cautious to prevent ** position losses from engulfing meager profits.

Xie Zhaowei: Individuals also believe that both demand-oriented and trade-oriented companies should adopt a buy-in hedge. It is recommended that demand-oriented companies purchase RB1205 contracts to preserve the purchase volume of future spot plans. In particular, for construction-type construction enterprises, considering the steelmaking cost of rebar and the trend of future market prices, there is limited space for significant downside of spot prices. **The premium rate of the main contract RB1205 is at a historically high level and consideration can be given to a certain amount of hedging operations.

For trade-oriented companies, considering that traders' rebar stocks are at a relatively low level in the same period of previous years this year, and most of the current traders are relatively tight, there is a general lack of confidence and funds for hoarding low-cost resources. In this environment, consider buying a RB1205 contract to establish virtual inventory for a certain amount of winter inventory.