1. Fundamental supply and demand of 4-5 plates and strips

1. The supply structure of hot-rolled plates and strips will continue to maintain a high level from April to May, and production capacity may continue to increase.

Judging from the production estimates from April to May, the total supply in May will not drop much month-on-month. At present, the point-to-point profits of steel mills are relatively good, generally above 200 yuan/ton. This has also resulted in high operating rates, strong continued bias in molten iron, and output will continue to remain at a high level except for normal maintenance. As for April, May, and June, in these three months, new hot-rolling production lines will be gradually put into operation. This will also lead to a new high output situation for hot-rolling that was originally oversupplied.

2. Demand-side situation of hot-rolled plates and strips from April to May

In 2024, demand will enter a slow recovery pace from April to May. The improvement in consumption is mainly reflected in several aspects: 1. Funding is slightly better than in the first quarter, especially the issuance of special bonds and plans have increased to a certain extent; 2. Exports After the price decentralization, the total direct export volume may continue to be maintained; 3. The recovery of manufacturing industry, especially automobiles, has improved significantly, while other manufacturing consumption exports are still better than domestic consumption. Therefore, among the four major consumer industries in May, real estate continued to decline, infrastructure rebounded, and manufacturing and exports maintained a flat trend, which will provide strong support for consumption.

From a data perspective, the inventory-to-sales ratio of hot-rolled steel is worse than that of threaded steel, but the actual price of hot-rolled steel is higher than that of threaded steel. This aspect can also reflect that the basic consumption of hot rolling is still stronger than that of threads, and the core problem of threads being destocked is still low production. Therefore, from a time perspective, consumption will still be in a good recovery process, but this is still a staged improvement (depending on money). At present, if there is no obvious external intervention, after the outbreak of consumption points, the supply and demand structure will continue to return to the original level, but this may not be clearly reflected before June.

2. Main risk points of domestic plate and strip products from April to May

1. The total inventory margin is high and the destocking slope is not high, which will restrict the increase.

After entering April, consumption is still in a process of marginal improvement, but the elasticity is not high. Although the inventory accumulation has declined to a certain extent, the destocking slope has not changed significantly. The reason for this problem is that on the one hand, production remains at a high level, and on the other hand, consumption is not like last year, and there is no obvious outbreak point (last year’s Q1-2 infrastructure was implemented, consumption exploded), which makes the adjustment In the process, the company continued to maintain low inventory operations, and the problem of inventory explicitness was fully exposed.

According to recent logic, the pressure on steel mills has eased, and both capital and inventory pressures have declined. At present, molten iron is gradually recovering and the momentum for resuming production is increasing, so a structure that squeezes profits upward may be created. Judging from the forecast for the next one month, costs may continue to rise. On the one hand, shipments will be maintained and consumption will rebound. On the other hand, the US dollar exchange rate will increase, leading to an increase in domestic costs, which will restrict spot prices.

2. The consumption relay may gradually slow down after May, leading to a month-on-month decline in average consumption

From the perspective of consumption in the second quarter, the resilience of the manufacturing industry in April was supported by the resilience of the manufacturing industry, and the infrastructure support after the year-on-month improvement in funds in May. From the perspective of the consumption pattern in the future, it is difficult to see the momentum for an explosion of demand. This will restrict the sustainability of domestic consumption, causing an imbalance in supply and demand in the future, and inventory risks will accumulate again.

At present, the announcement of special bonds in various places in May is expected to rebound significantly, with a year-on-year increase of approximately 10%. This may cause the market to have a short-term motivation to rise, but prices will rebound with demand. The supply will also increase accordingly. When the financial pressure increases, and the supply is at a high level, conflicts may break out in the off-season. At present, project fund repayments have recovered somewhat, but not at a fast pace.

3. Summary

Judging from the situation in April, the biggest support is manufacturing and exports, while the biggest support point in May is the easing of front-end construction funds. Judging from this structure, the disadvantage lies in the longer pressure period, while the relative advantage is that demand eases, and the process of supply rebounding and squeezing profits upwards appears. Under such circumstances, the short-term contradiction between supply and demand has eased, which can support market confidence, and the demand structure will be dominated by rigid demand, which will provide bottom support for prices. The pressure on Kanban strips may continue to ease in May, especially as the regional structure will change. East China may still be the strongest performer, and the average price level is expected to bottom out between 3,750-3,950 yuan/ton.

Looking at the later stage, the points that need attention are: 1. The molten iron will gradually recover, a balance point between raw materials and molten iron may appear, and cost support will appear; 2. The output of plates and strips will continue to remain high, the consumption margin will improve, and the inventory-to-sales ratio will There has been a slight improvement; in March and May, the pressure on steel mills to reduce prices and accept orders was acceptable, export consumption was maintained, domestic demand was declining, and the supply and demand contradiction still showed marginal improvement.