This week, the price of building materials has both risen and fallen steadily, but because the downstream has not been restored and the market hype is strong, spot quotations in some areas are still strong, the overall increase of steel price is between 20-130 yuan/ton and the decline is between 20-50 yuan/ton. Steel prices gradually weakened after the "red opening" of the surge at the beginning of the week, which is slightly different from our pre-festival low expectations between the two high schools, mainly due to the surge in inventories and weak demand. After the surge in steel prices, market sentiment increased sharply.
As for the next week's market, considering various factors, we expect that steel prices will remain stable in general next week with a higher probability of short-term rebound, or a slightly lower trend, for the following reasons.
(1) From the perspective of multiple factors:
1. The price of raw material iron ore is still strong, and the willingness of leading steelmakers to lower the price is not great to increase the production cost of steelmakers.
2. The issuance of trillion local debts is accelerated and promoted, and the policy of infrastructure underpinning further boosts the demand for infrastructure construction in spring, so the spring market is still expected.
3. After Lantern Festival, with the gradual recovery of downstream construction, the demand toughness of real estate steel will also show in the first quarter.
4. The current steel price falls back and releases the risk. The price is close to the price range of the winter storage before the year, and there will be strong market support in the cost area.
(2) From the perspective of negative factors:
1. During the two weeks before and after the Spring Festival, the speed of barricade warehouse is quite astonishing, while steel prices soar far faster than inventory digestion speed, leading to a rise in market panic;
2. Recent low-temperature rain and snow weather in the central and eastern regions of China is more, which further hinders the recovery of downstream demand.
3. Sino-US trade negotiations are under way, and there are still uncertainties in the negotiation process and potential threats to the steel industry.
4. The sharp adjustment of future thread steel in succession, while the spot is still relatively strong, does not rule out the possibility of further panic and aggravated dumping due to trade negotiations.
In summary, in the context of short-term overshoot and tapping prices of mainstream steel mills, we expect steel prices to gradually stabilize and rebound in stages next week, with a rebound range of 20-60 yuan/ton, or a slightly lower trend.
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