The rainy season is coming, steel prices are weak
 
Since late May 2019, the rebar futures contract of 1910 has oscillated downward, while the price of iron ore futures has also declined slightly, but the decline is much smaller than that of rebar futures. The industry believes that the downstream demand for steel will be weakened in June, but the release of high output will increase the pressure on market supply, and the steel stocks are expected to slow down or even rebound. It is expected that the steel price oscillation will be weak in June.
 
        Raw material prices are weak
        In the week of June 6, the imported iron ore market stabilized and weakened. According to the data, as of June 6, 58% Australian powder price of 91 US dollars / ton, compared with the previous week; 61.5% Australian powder price of 95 US dollars / ton, compared with the previous week; 62% Australian block price 121 US dollars / ton, It fell by US$1/ton from the previous week. Wu Jingjing, deputy director of the Market Research Department of China Iron and Steel Association, said at the 2019 Iron Ore International Market Symposium that since June, the tight pressure on iron ore supply has been greatly eased, although from the statistics of the volume of shipments and shipments, The supply side will continue to decline for a while, but the most stressful moment should be April and May, and it is now over. Whether the follow-up market will resume rising will depend on the steel consumption in the fourth quarter.
        On the demand side, analysts believe that while supply may weaken, demand for high-grade iron ore in China will continue to grow. There are two reasons: First, infrastructure investment has rebounded, driving the growth of domestic steel demand. In order to hedge the downward pressure on the economy, the capital investment with high steel consumption is expected to serve as a “stalwart” for steady growth, which in turn will generate strong demand for spot steel. Second, steel exports will pick up this year. From January to March of 2019, China's steel exports amounted to 17.03 million tons, a year-on-year increase of 12.6%. The export value was US$13.497 billion, an increase of 2.6% year-on-year. Its large increase shows that the export of steel and steel-consuming products has rebounded.
 
        Weakening supply and demand
        From the perspective of steel downstream, the pressure on subsequent steel supply may increase.
        Looking back at May, steel social inventories continued to decline, and the rate of decline slowed by 10.0 percentage points from the previous month. According to the data, as of May 31, the social stock of steel in 29 key cities nationwide was 1.05 million tons, down 10.4% month-on-month and up 5.1% year-on-year. Among them, the social stock of construction steel was 6.075 million tons, down 16.7% month-on-month and 0.9% year-on-year; the social stock of sheet metal was 3.975 million tons, up 1.3% month-on-month and up 15.8% year-on-year.
        Analysts said that at present, the overall social stocks of steel have slowed down, and the rise in sheet stocks has spurred the growth of stocks, and social stocks have increased significantly year-on-year. In the later period, as production continued to be released and downstream demand gradually weakened, the decline in steel social inventories may gradually slow down or even rebound.
        The operating rate of blast furnaces in steel companies continued to rise in May. The data shows that the operating rate of blast furnaces in 100 small and medium-sized steel enterprises nationwide was 81.5%, 0.6 percentage points higher than the previous month. At present, the profitability of steel production enterprises is still considerable. According to the data, the average gross profit per ton of steel enterprises in May is around 400-500 yuan, and the production enthusiasm of steel enterprises maintains a good release.
       Analysts believe that in June, many places in the south entered the rainy season, and rainfall will seriously affect the construction of construction projects, which in turn will affect the demand for construction steel. At the same time, steel output is still high, and steel social inventories will also show a slowdown or even a rebound, and supply pressure will increase in the later period.