Multiple policies are beneficial to stimulate, and the steel market fluctuates higher in the off-season

At present, the Federal Reserve has suspended raising interest rates, and Europe and Denmark continue to raise interest rates by 25 basis points, indicating that the pressure of inflation in Europe and the United States is still relatively high, and the global economy is still facing the risk of recession. Recently, the five major international organizations have unanimously raised their forecasts for China’s economic growth this year, which shows that China’s economy continues to recover and its transformation and upgrading continue to advance. However, it must also be noted that the international environment is still complex and severe, the world economic growth is sluggish, and the domestic economic recovery is improving. , but the market demand is still insufficient, some structural problems are more prominent, and efforts are still needed to promote high-quality economic development.
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From the 13th to the 15th, the central bank successively lowered the reverse repurchase operations OMO, SLF, and MLF by 10 basis points each. The market expects that the LPR interest rate on the 20th may also be lowered accordingly. A strong signal of the introduction of counter-cyclical adjustment policies. For the steel market, due to the relatively weak demand performance in the traditional off-season, the market has strong expectations for the implementation of “interest rate cuts”, and the game scene between strong expectations and weak reality has also emerged again.
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In the short term, the domestic steel market will present a pattern of “poor economic performance, expected interest rate cuts, insufficient off-season demand, resilient supply, and strong cost support”.
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From the perspective of the supply side, due to the promotion of the profit-seeking effect, the willingness of steel mills to release production capacity is still strong, and the short-term supply side will show strong resilience.
From the perspective of demand, due to the impact of high temperature and rainy weather, the pace and progress of project construction will gradually slow down, and the pace of procurement for terminal demand will also be relatively slow. However, the continuous shock and rebound of steel prices still stimulates the release of stocking demand.
From the perspective of cost, the steady decline of iron ore prices, the steady rise of scrap steel prices and the stability of coke prices make the cost support stronger. It is predicted that this week (2023.6.19-6.25) the domestic steel market will show a pattern of shocks and rebounds in the off-season, but it cannot be ruled out that some regions or varieties will call back due to insufficient transactions.