Since last Friday, rebar futures prices have continued to rebound. The RB2001 contract has been close to 200 yuan/ton since the lowest point. The supply and demand drive up and the low valuation of futures are the core factors that induce this wave of rebound. The author analyzes the factors of supply, demand, inventory and valuation, and believes that the rebound in the market is expected to continue, and the rebound space depends on the demand for the peak season.

Reduced production effect

The author believes that the change in steel supply depends mainly on both policy and profit. In terms of policy, the production restriction policy will cause the steel mills to passively reduce production; in terms of profit, when the steel mill profits are compressed to a certain level, the steel mills will actively reduce production. From the policy point of view, after August, steel mills in many parts of the country have been shut down for maintenance, which will lead to shrinking steel supply. From the point of view of profit, because the cost of blast furnace is lower than the cost of electric furnace, when the steel price falls, the cost of the electric furnace will fall below the cost of the blast furnace, which means that the electric furnace will lead the blast furnace. According to calculations, after entering August, some independent electric furnaces began to suffer losses. Because the electric furnace shutdown is relatively flexible, its production rhythm is more sensitive to profit, and the loss induces electric furnace production reduction.

Rebar production began to decline in the context of blast furnace production subject to policy restrictions and reduced production of electric furnaces due to losses. The data shows that the weekly production of rebar has declined for four consecutive weeks since mid-August, and the current weekly rebar production has fallen below 3.5 million tons, close to the level of April. The continued contraction of supply is an important factor driving the rebound in recent rebar futures prices.

The peak season of consumption is coming

The key to the medium-term demand for rebar is the change in the real estate industry. Currently, the real estate industry still exhibits high toughness characteristics. Data show that from January to July, real estate investment increased by 10.6% year-on-year, while the new construction growth rate of housing was 9.5%, and the growth rate of housing construction area was 9.0%. Some views believe that real estate investment and other indicators will fall in the second half of the year, which means that demand for rebar will shrink sharply. However, the author is cautious about this view, at least there is no indication that real estate investment and other indicators will fall sharply, which means that rebar demand may remain resilient in the medium term.

Under the premise of maintaining resilience in the medium term, short-term demand changes mainly focus on seasonal characteristics. According to the laws of previous years, after mid-August, with the end of high temperature weather, there is a possibility that demand will pick up. From the national construction steel volume index, the spot transaction volume in September last year will increase from August. In short, the medium-term resilience of rebar demand is still continuing, and the short-term will usher in the traditional consumption season, which will support the rebar futures price, and the demand for the peak season will determine the rebound of rebar prices.

Inventory pressure reduction

Inventory data can be used as evidence of changes in supply and demand. Inventory data shows that as of the week of August 30, rebar stocks in the rebar mills were 2.699 million tons, up 49.4% year-on-year; social inventories were 6.0924 million tons, up 40.9% year-on-year; total stocks were 8.793 million tons, up 43.4% year-on-year. %. In terms of absolute volume, current inventory levels are at the highest level in history. However, although the total amount of rebar stocks is indeed at a high level, inventory pressure still exists, but from the inventory changes, rebar stocks fell for three consecutive weeks in August. In other words, since August, rebar stock pressure has been reduced. In September, if demand in the peak season starts as scheduled and supply contraction continues, rebar inventories are expected to decline further, and the strength of inventory decline also affects the rebound of rebar prices.

Valuation is relatively low

The above analysis of supply, demand, and inventory factors is focused on market drivers, and the specific trend of rebar prices needs to be judged by combining valuations. Valuation indicators, we mainly focus on the basis change of rebar. From the basis of the basis, the current rebar futures price is in a discounted pattern. The discount rate of the RB2001 contract is about 10% compared with the spot. The discount rate is similar to the RB1901 contract history, which is significantly higher than the RB1801 contract and the RB1701 contract. The discount rate in the same period of history. That is to say, the futures price is discounted to the spot price, and the discount rate is higher than the historical period, indicating that the futures price is relatively undervalued, and the low valuation of the futures price is also a factor supporting the futures price.

Overall, the recent rebar futures price rebound has a cause, the contraction of supply, the arrival of the peak demand season, and the reduction of inventory pressure are both the cause of the rebound and the reason for supporting the rebound. The author believes that the key to the rebound in the market is the quality of the demand season. If the demand in the peak season cannot be effectively amplified, the rebound space will be limited; if the demand in the peak season exceeds expectations, the rebound space will be considerable.