Strong expectations fall into weak reality, and there is a need for adjustment in the steel market

At present, the international environment is becoming more complex and severe, the contraction of external demand is further manifested, and the domestic epidemic has rebounded in a large area. The “triple pressure” of demand contraction, supply shock, and weakening expectations has increased, which has obvious constraints on economic operation. Although the external environment is complex and severe, the domestic economy is still facing downward pressure, and there are constraints on investment growth, the fundamentals of my country’s long-term improvement have not changed, with broad development space and huge investment potential.
For the domestic steel market, with the continuous release of favorable macro policies and the return of the positioning of the real estate industry, the market’s confidence and expectations for the overall improvement of the Chinese economy next year have increased significantly.
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From the perspective of the supply side, due to the shock and rise of steel prices, the production enthusiasm of steel mills has once again increased, but the limited profit margins have also restricted the release of production capacity, and the short-term supply side will show a trend of recovery under pressure.
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From the demand side, due to the recent shock and rise in steel prices, the demand for inventory replenishment in some terminal markets has been significantly stimulated, which has also caused the social inventory of steel to decline again, and at the same time, the demand for winter storage has been gradually opened.
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From the perspective of cost, due to the recent firm price of raw materials, the cost support has been significantly enhanced, and the willingness of steel mills to raise ex-factory prices is also more obvious.
In the short term, the domestic steel market will also face a game between strong expectations and weak reality. The supply will pick up under pressure in the short term, the demand for replenishment will be released significantly, the demand for winter storage will be limited, and the cost support will be significantly enhanced. It is predicted that next week (2022.12.19-2022.12.23) the domestic steel market may enter a shock adjustment market after a rapid rise.