Steel prices tend to rise rather than fall

The margin of safety is higher to buy dips or range play
The adjustment of macro policies and cost support for steel pipe for sale is an important driving force for the expected improvement of steel fundamentals. Steel futures prices have started ahead of schedule, and have formed resonance with spot in the recent past, and the two prices go up hand in hand. In July, the trend of steel prices has changed significantly compared with June, gradually from the oscillation into the state of slow rise. As of July 19, the main rebar contract has rebounded more than 20% from its previous low in May. Although the high temperature spot trading conditions, futures and spot prices have formed resonance, which will strengthen the market’s judgment of the future trend.

Domestic macro policies were adjusted to stabilize prices of industrial products
The impact of macro policies on the prices of industrial products such as hot rolled steel pipe is still not to be underestimated. However, with the gradual shift of global macro policy from monetary policy to fiscal policy, the overall rise in industrial product prices has come to an end and is dominated by structural prices. Loose money during the pandemic has widened the gap between supply and demand for goods, and commodity prices have set new highs. Inflation and its related effects have become a concern for governments and central banks around the world. The high-level actively introduced various policies to deal with inflation, and the inflation expectations of the financial market gradually cooled down. The 10-year treasury interest rate of pre galvanized steel pipe fell sharply, below 1.3%, and the procyclical sector of the US stock market was also sold off on a large scale.

The cooling of inflation expectations will inevitably have an impact on the price of cycle goods. The domestic cycle industry accounts for a large proportion of the economy, and the Chinese government cannot stand by and watch. On July 9, China’s central bank decided to cut the reserve requirement ratio for financial institutions by 0.5 percentage point, freeing up about 1 trillion yuan. In addition, the total financial volume increased by 3.67 trillion yuan in June, far exceeding market expectations of 2.96 trillion yuan. I suspect that the purpose of policy adjustment is to hedge the impact of domestic export decline on the economy in advance. The current domestic economic situation is relatively stable, and the easing policies related to finance will increase the valuation of “inner circulation” commodities, which is related to the recent rise in the prices of aluminum, steel conduit, stainless steel and glass.