On the 15th day of the first lunar month, the Lantern Festival is celebrated with laughter amidst the loud crackling of firecrackers. The fleeting moments of reunion always seem too short, and once again, it's time to leave home for another year. The Spring Festival of the Year of the Dragon in 2012 concluded with the sounds of fireworks on the night of the Lantern Festival. The spring travel rush will also see its final peak in passenger traffic as people heading out to work once again set off on their journey. With their calloused hands, they will continue to propel the development of China’s economy.
In 2012, China's economy faces a daunting test. On one hand, external demand has shrunk, with Europe and the United States heavily burdened by debt, making the export situation less than optimistic. On the other hand, domestic demand has slowed down, and there is a possibility that it will contract with the continuous adjustment of GDP growth rates. In particular, the regulation of the real estate industry has initially proven effective. Although fixed asset investment remains at a relatively fast pace, there has been a slight decline in year-on-year growth. However, we must not undervalue ourselves excessively. This year marks the "year of leadership transition" for the government. During this special period, the goal for the entire year of China's economic development is to "seek progress while maintaining stability." From large to small scales, steel demand can also reflect a "steady progress" trend.
From historical experience analysis, after the Lantern Festival comes the peak return-to-work season for migrant workers. As downstream enterprises gradually resume operations, the first steel demand peak of the year is no longer far away. It is worth noting that this year's Spring Festival came earlier than usual. Therefore, seasonal factors must be taken into consideration. January and February are the coldest months of the entire year. In most areas of northern China, construction work halts, and some manufacturing companies also slow down production. Even if projects and industrial production in southern regions can continue normally, demand will only begin to pick up around the end of February or early March.
One must know the military principle: "Before the troops move, the supplies must go first," meaning logistics support is crucial. For downstream enterprises, it is the same; they must prepare sufficient production materials before large-scale production begins. Thus, before the peak season of steel demand arrives, there must first be a peak season for steel procurement. According to feedback from market participants, the transaction volume in the first week after the holiday was better than expected. Many merchants were somewhat uncertain when preparing stock before the holiday, but from the actual situation, except for Northwest and Northeast China where transactions were rare due to climatic constraints, most markets across the country have already returned to normal. Market prices are also showing a "steady progress" trend. According to Steel Network monitoring, during the first week after the holiday, in Shanghai, the average price of various steel products increased: 18-25mm rebar averaged 4159 yuan/ton, rising by 24 yuan/ton; hot-rolled steel mainstreamed at 4260 yuan/ton, increasing by 30 yuan/ton; 14-20mm medium plate priced at 4330 yuan/ton, increasing by 50 yuan/ton. Without the support of actual transactions, how could market prices advance steadily?
As mentioned earlier, the steel demand peak is expected to arrive at the end of February or early March. Therefore, the period from after the Lantern Festival to the end of February is the key procurement period. No company would wait until the steel mills and steel traders raise market prices before entering the market for procurement. Thus, the next 1-3 weeks will be the critical period for transactions. Steel traders should make preparations, replenishing missing specifications in the market and appropriately supplementing inventory for popular specifications. Operationally, they should proceed step-by-step, accumulating small victories into big ones. If price hikes deviate from the actual market conditions, it may lead to customer loss, which would be counterproductive. Procurement agents, on the other hand, need to focus more on timing their purchases and selecting resource types. There are still many old resources produced before October last year in the market. Although they are rusted, if quality can be guaranteed, their prices are relatively more favorable.
Link to the article: Hongxing Materials by: http://www.hxwz.cn/