baccaratforfun| Hot rolled coils: Demand is moving to the left, supply is right, and coil prices may still have room to fall

Li Huan, an information analyst at Zhuochuang

[introduction] 2024 to the presentBaccaratforfunThe hot-rolled coil market basically presents a situation of strong supply and weak demand. by May, the demand performance is lower than expected, while the supply continues to remain high. under the background of the opposite direction of supply and demand, the price of hot-rolled coil is under obvious pressure, or there is still room for downside.

According to Zhuochuang's statistics on the changes in supply and demand of hot-rolled coil in the past four years, it can be seen that in the past four years, the supply of hot-rolled coil has maintained a trend of increasing year by year, while the growth rate of demand is relatively slow. In 2024, it has declined to a certain extent compared with 2023. Under the background that supply continues to increase, and demand stagnates, or even declines to a certain extent, the gap between market supply and demand-the gap between supply and demand-gradually expands. According to specific data, from January to May 2024, the gap between supply and demand of hot-rolled coil is basically maintained at the level of more than 1160-13.9 million tons.

In order to better compare the relationship between the change of the difference between supply and demand and the price of hot-rolled coil, Zhuochuang Information introduces the concept of the ratio of supply and demand. By comparing the changing direction of the difference between supply and demand and the fluctuation of hot-rolled coil price, we can see that most of the time, the changing direction of the difference between supply and demand is negatively related to the price of hot-rolled coil. As can be seen from figure 2, when the difference between supply and demand is negative, that is, the difference between supply and demand decreases, the price of hot-rolled coil often rises, while when the difference between supply and demand increases, that is, the gap between supply and demand expands, the price center of gravity of hot-rolled coil often moves down. The main reason why the relationship is relatively stable is that when the gap between supply and demand narrows, it often means that the contradiction between supply and demand in the market is alleviated, whether it is an improvement in demand or a reduction in supply, which greatly relieves the pressure of supply and demand on price. thus driving up the market price.BaccaratforfunWhen the gap between supply and demand widens, it means that the contradiction between supply and demand in the market is heating up, and more supply and less demand in the market will lead to a drop in market prices.

As can be seen from the above, the relationship between market supply and demand will largely determine the price trend of hot-rolled coil, and the contradiction between supply and demand in the market in May is expected to remain at a high level.

From the supply point of view, since the monthly import of hot-rolled coil is only 50-80,000 tons, less than 1% of the total supply, the output can basically represent the supply of hot-rolled coil. According to the changes of monthly output in the past four years, see figure 3, it can be seen that the output of hot-rolled coil is basically increasing year by year, and the monthly output in 2024 is above the last four years. According to the specific data, the average monthly output of hot rolled coil is 2559 from January to April 2024.Baccaratforfun.660000 tons, an increase of 12 percent over the average output from January to April 2023Baccaratforfun.27%. The increase in output has driven the market supply to maintain a high level.

In terms of output in May, according to Zhuochuang Information Statistics, since the beginning of the year, three rolling lines have been put into production across the country, with a production capacity of 14.1 million tons, and all the new production capacity in May has been debugged. The formal production of hot-rolled plate products, the intervention of new production capacity, will undoubtedly drive the output of hot-rolled coil to continue to maintain a high level. Total hot-rolled coil production is expected to reach about 26.4 million tons in May, an increase of 2.89 per cent from April. In this regard, it can be expected that the supply side will continue to maintain high pressure mode in May.

According to the demand situation, according to the monthly demand change of hot rolled coil monitored by Zhuangchuang Information from 2021 to now, the demand change is relatively flat in the past four years, and the demand in 2024 is at the high level in the past four years. according to specific data, the average monthly demand for hot rolled coil from January to April in 2024 is 24.6561 million tons, which is 5.74% higher than that of last year, while the increase in output is 12.27% over the same period last year, and the increase in supply is greater than that in demand. As a result, the contradiction of oversupply in the market continues to increase. According to the market demand in May, with the advent of the plum rain season and entering the off-season of traditional demand, the demand for hot-rolled coil may show a decreasing trend, and it is expected that the demand for hot-rolled coil in May will be at the level of 25.4 million tons, down 1.74% from April.

In May, the market supply of hot rolled coils increased, while demand decreased, and supply and demand changed in the opposite direction. The opposite trend of demand to the left and right will also lead to the expansion of the gap between supply and demand of hot rolled coils. As can be seen from the above analysis, the widening gap between supply and demand forms a negative feedback effect on prices, and then it is expected that there may be room for hot rolled coils to fall in May. Taking into account the uncertainty of the macro news, with the release of the news, the volume price may rebound in stages, but in terms of the price center of gravity for the whole month, the main driving factors will still focus on the fundamentals of supply and demand. It is expected that the price center of gravity will remain on a downward trend in May.