How much does the hottest trade friction affect th

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How much impact does trade friction have on steel prices

the trade war triggered panic in the whole market, killing China's stock market, commodities and exchange rate, while the Asia Pacific and other peripheral markets fell together. In this decline caused by systematic panic, the main contract of rebar futures fell by about 140 yuan/ton as of the afternoon closing on the 19th, and finally closed down by 113 yuan/ton. In terms of spot goods, Taking Hangzhou as an example, it fell by about 40 yuan/ton, the futures and cash prices were slightly split, and the futures and cash basis spread significantly expanded to more than 400 yuan/ton

judging from the current inventory level and the rate of inventory removal, the fundamentals of supply and demand are not pessimistic, and even more optimistic than expected; Moreover, under the expectation of maintaining the stability and neutrality of liquidity, the demand should still be guaranteed in the next 1 to 2 months, while the supply is difficult to increase significantly due to environmental protection

as for the expectation that trade friction may lead to the decline of China's macro-economy, from the perspective of investment, consumption and export of the troika driving China's economy, when the consumption performance in May is not ideal, if the exports with eye-catching performance in the first half of the year fall sharply in the second half of the year due to trade friction, then short-term investment (real estate, infrastructure) to stabilize the economy is still an indispensable choice, And then increase the steel demand

inventory is low, and the spot is difficult to spot. It plummeted in March.

at present, rebar inventory, whether steel mills or traders, is at a low level in recent years, especially the steel mill inventory is at the lowest level since 2015 (see the figure below). The steel plant has low inventory, good profits and abundant liquidity. Under the condition that there is no turning point in the long-term trend, the steel plant is willing and able to support the price

further from the perspective of extruder as an important processing equipment trader, since 2017, the steel price has fluctuated violently, the macro capital has gradually tightened, and the profitability and confidence of traders have gradually weakened. The direct reason for the sharp decline of spot prices in March, 2018 is the 49% year-on-year growth of some trade, the rupture of the commercial capital chain, and the dumping of goods and smashing prices. At present, the inventory of traders is low, and the use of leveraged funds is also more cautious

Taking Hangzhou as an example, Dong Yun, head of Zhejiang region of Zhongtian iron and steel sales office, said that now many spot traders have very little inventory, and only some large investors have slightly complete specifications. At the beginning of the year, the Hangzhou market was 800000 tons, and there are about 100 traders. Now the inventory is 300000 tons, so the inventory in the hands of traders is really small

in addition, Qiu Yuecheng, director of black research at Everbright Futures Research Institute, said that at present, traders with goods in their hands are goods that move forward, and they are still profitable even if the price falls slightly. Most traders follow the steel plant's price to move in and out quickly, and do not hoard as much as in March, betting on the aftermarket, so it is difficult to panic and smash the price

the construction in progress and liquidity are worry free in the short term, and the demand is sustainable.

as for whether the current optimistic supply-demand relationship can be sustained, under the condition that the supply is still constrained by environmental protection, the sustainability of demand deserves attention. In terms of the area of the construction site under construction and the liquidity of funds, it is guaranteed in the medium and short term

more than half of the downstream demand for steel comes from the construction industry, and the rebar, which is originally building materials, accounts for a higher proportion. The scale of construction in progress can predict the steel demand in the medium and short term

Ye Yanwu, President of the Research Institute of chaos Tiancheng Futures Co., Ltd., said that according to the growth rate of the newly signed contract amount of the eight Central Enterprises tracked by him, 2017 was the year with the highest signed contract amount in the construction industry (see the figure below). According to the annual project construction cycle, the large probability of the construction area in the construction industry will remain stable in the third quarter of this year

under the condition that the construction area is guaranteed, how to convert it into real steel demand depends on the situation of capital. The less than expected release of demand caused by tight capital is an important reason for the sharp fall in steel prices in March this year

Du Hui, an analyst, said that the main futures contracts rose all the way after the RRR reduction on April 17. Under the increasing pressure of external trade friction, the fine-tuning of monetary policy helped to revive the real estate chain. Recently, the real estate data in may comprehensively exceeded market expectations, regardless of sales and new construction, and the source of funds rebounded sharply, thus hedging the impact of infrastructure decline

according to the specific data, the monthly real estate development investment has remained at a high level of 10.2% year-on-year, and the monthly new construction area has increased by 10.8% year-on-year. In June, the funds in place of real estate development enterprises were 6200.3 billion yuan, with a year-on-year increase of 5.1%, and the growth rate increased by 3 percentage points, including 1947.3 billion yuan of self raised funds, with a year-on-year increase of 8.1%. With the tightening of credit, the growth rate of self financing sources has increased

under the trade friction, the export is worried, and the driving force of investment is still indispensable.

from the perspective of inventory, demand sustainability, environmental protection and production restriction, the medium and short-term steel price is afraid to follow the following steps: deep decline. However, in addition to the above fundamentals, the main reason for the sharp decline in the market today is the weakening of macro expectations caused by trade friction and systematic panic. How will this affect the future steel price

concerns about systemic risks are considered or unsustainable. China's economy is resilient and capable of maintaining a healthy track of development, and China's regulators and investors will also maintain the steady operation of China's financial market. This confidence is accumulated through a series of events such as the 1998 Asian financial crisis and the 2008 U.S. subprime mortgage crisis, and the short-term panic will eventually dissipate

it is undoubtedly a huge business opportunity, and the impact of exports on the long-term macro weakness will be real. Let's comb through the contributions of investment, consumption and exports to China's economy from January to may, as well as the current strategies for China's macro development to find the answer

China is undergoing a critical and necessary economic transformation, from an investment driven economy to a consumption (domestic demand) driven economy, and upgrading from low-end manufacturing to high-end manufacturing. However, from the economic data from January to may, although emerging consumption such as purchasing performed well, the overall consumption data was weak; The performance of investment has rebounded under the pull of real estate; The export is actually a little unexpected

in May, China's exports denominated in US dollars were 12.6% year-on-year, still maintaining a high growth rate. The beautiful export data, on the one hand, is that under the circumstances that the PMI of Europe and Japan continued to fall, the PMI of the United States rebounded in May, and the overall stable external demand supported exports; On the other hand, domestic enterprises are worried about the escalation of trade friction and the phenomenon of catching up. However, if trade tariffs really come in the second half of the year, the current good export situation will be difficult to continue

in the expectation of weaker exports, at present, residents' consumption is restrained by the impact of the purchasing power of borrowing to buy houses and overdrafts. In May, the nominal growth rate of total retail sales of social consumer goods was 8.5%, and the actual growth rate was 6.8%, both reaching a new low since 2004. Retail sales above the designated size increased by 5.5%, which was the lowest in 11 years

in the face of pessimistic macro expectations, using investment to hedge against economic decline is a necessary option

this logic was also verified in the first half of the year. In addition to the RRR reduction in April, in order to hedge the risk of economic downturn after the Spring Festival, the average monthly fiscal expenditure increased by 15% year-on-year, significantly higher than the level before February (see the figure below)

time, price, direction: the crossroads between China's macro and steel prices

in the medium and short term, steel prices are supported in terms of fundamentals and macro logic, but China's economy still has a distant vision, that is, to become a powerful country based on consumption and high-end manufacturing. From this level of logic, the momentum of investment will be relatively weak in the long run

the recent increase in the threshold of personal income tax is actually encouraging consumption, gradually replacing investment with the driving force of consumption, and supporting the development of high-end manufacturing through targeted loans

therefore, in the dimension of time, with the rise of new economic momentum and the decline of China's macro leverage, the hedging attribute of investment will gradually weaken. And this kind of change is more likely to come with the change of policies, such as the tax reform, which is a redistribution reform in a way. The personal income tax reform is to stimulate consumption, and the recently rumored property tax reform is to rebuild the existing distribution mode

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