The article discusses the current state of the hot-rolled coil market, emphasizing the dynamic relationship between supply and demand. From a macroeconomic perspective, achieving true equilibrium in supply and demand is rare. Instead, markets tend to shift continuously in response to various factors, making it more practical to track changes rather than fixed levels. This approach allows for better prediction of price movements. In the steel industry, focusing on overcapacity alone may not provide meaningful insights into product pricing. Instead, understanding how supply and demand evolve is key to analyzing market trends.
Currently, the hot-rolled coil market appears to have completed the first phase of adjusting supply-demand imbalances. The challenge of resolving these contradictions has now escalated, and with ongoing reforms and global inflation, a new upward trend in prices seems to be emerging.
1. **Supply and Demand Dynamics**: After reaching a low of 49.2% in August, the domestic manufacturing PMI gradually recovered, rising above the 50 threshold in October and November. HSBC reported a manufacturing PMI of 50.9 in December, the highest in 14 months. Meanwhile, downstream sectors like automotive and home appliances showed signs of recovery. Car sales in China rose year-on-year in November, and rural appliance sales reached 9.7 million units. However, hot-rolled coil inventories continued to decline, hitting a 41-month low of 3,028.8 thousand tons as of press time, while output also fell to its lowest level in seven months.
2. **Price Trends and Cost Drivers**: Steel mill ex-factory prices often lead spot market prices by about one to one and a half months. This pattern aligns with the timing differences observed in the Tongyi PMI and steel price cycles. As costs rise, support for steel prices is shifting upward, signaling a potential continuation of the price increase.
3. **Global Monetary Policy Impact**: With the Fed launching QE3 and later QE4, the U.S. continues to inject $85 billion monthly into the market. Although the fiscal cliff issue remains unresolved, the expansion of liquidity has pushed up prices of dollar-denominated commodities. Technically, both rebar and hot-rolled coil futures are trading above moving averages, with the DIFF and DEA lines showing strong momentum, suggesting continued support from capital markets.
4. **Market Outlook and Price Movement**: Favorable policies for winter storage and the sustained recovery in manufacturing data suggest that economic stabilization is taking hold. Since early September, hot-rolled coil prices have shown a clear upward trend, even if with some fluctuations. Shanghai prices approached the 4,000 yuan mark, while Guangzhou and Lecong prices broke through 4,100 yuan. Tianjin prices also surpassed 3,800 yuan, indicating a renewed upward movement after the September peak.
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