Looking back on the first half of 2024, the macroeconomic situation at home and abroad is complex and changeable, the first half of 2024 steel prices fell as a whole, from January to April, with the state to strengthen the supervision of iron ore, as well as the impact of demand contraction during the Spring Festival, the price of steel has been declining, and then from the beginning of April to the end of May, domestic policies began to exert force, additional issuance of treasury bonds, projects around the country began to land, the property market stimulus policy appeared, long funds accelerated their entry, and steel prices ushered in a rebound. However, the price has fallen all the way in June to a new low in the past two months, from the national average price of the main varieties, as of July 1, Lange Steel I-beam index was 3941 yuan, down 299 yuan from the beginning of the year; The channel steel index is 3875, down 379 yuan from the beginning of the year, the angle steel index is 3857, down 391 yuan from the beginning of the year, and the H-beam index is currently 3836, down 224 yuan from the beginning of the year. At present, the market is most concerned about whether the price will fall below the lowest point in April this year, and whether the price has fallen to the bottom, let's analyze it today.
1. Recent macro news combing
1. In May this year, the total retail sales of consumer goods and the total import and export of goods increased by 3.7% and 8.6% year-on-year respectively, 1.4 and 0.6 percentage points faster than the previous month. In the first five months, the national investment in fixed assets increased by 4% year-on-year. The "troika" supporting economic growth is running steadily.
2. In May, the national consumer price index (CPI) rose by 0.3% year-on-year, and the core CPI, which excludes food and energy prices, rose by 0.6% year-on-year, maintaining a moderate increase. The mainland's economy has a clear trend of steady growth.
3. The International Monetary Fund (IMF) raised China's economic growth forecast to 5% this year, and the World Bank released a China economic update to raise China's economic growth forecast for this year by 0.3 percentage points. Optimistic about the prospects of China's economic development, international institutions have raised their forecasts for China's economic growth.
4. In May, the mainland's crude steel output reached 92.86 million tons, a year-on-year increase of 2.7%. With the recent news that the crude steel output control policies will be implemented, the market's expectations for the reduction of crude steel output in the second half of this year have increased.
5. Recently, the Bank of Canada announced a 25 basis point interest rate cut to 4.75%, followed by the European Central Bank, the curtain of global central bank interest rate cuts opened, and the recent poor economic data in the United States has greatly increased the expectation of interest rate cuts.
6. According to data from the National Bureau of Statistics, the sales of newly built commercial housing from January to May fell by 27.9% year-on-year, 0.4 percentage points narrower than that from January to April. The sales area and year-on-year growth rate of commercial housing continued to remain low, but the decline rate slowed down and narrowed.
On the whole, the news policy is still positive, the economic data in May have shown significant growth, even the weak real estate data has been alleviated to a certain extent, while overseas countries have cut interest rates to stimulate the economy will be good for the rise in commodity prices, at the same time, the amount of special bonds this year is higher than last year, and there are special treasury bonds and ultra-long-term treasury bonds to support, the next infrastructure end of the steel demand improvement is expected to be very strong, overseas institutions have also raised the mainland growth expectations, On the whole, good news at the macroeconomic level is emerging, which will support market prices to a certain extent and avoid a panic decline.
Second, the market analysis of key varieties
First of all, let's take a look at the dollar index, because the thread, iron ore and international disk we analyze have synchronization and linkage, most of the time is the same rise and fall, and the variety of the outer disk is denominated in US dollars, so the analysis of the rise and fall of the US dollar exchange rate has a decisive impact on commodities. If the U.S. dollar index is strong, then commodities and blacks tend to fall, and vice versa. From the chart, we can see that the weekly chart of the U.S. dollar index has formed a diamond pattern adjustment structure from 2022 to the present, with the upper edge in the 107.30 area and the lower edge in the 99.50 area, and the price is currently approaching the upper edge of the pressure level. From the weekly point of view, it is obviously a volatile market, the key resistance point is in the 106 area, as long as this position is not effectively broken, with the expectation of the dollar interest rate cut, the dollar index may start a wave of downward trend. On the whole, the U.S. dollar index may encounter resistance in the second half of the year and begin to face decline, which will be good for commodities and the black series.
Figure 1: U.S. dollar index price chart
Let's take a look at the black chain index, the black chain index is derived from the weighted proportion of coking coal, coke, iron ore, thread, hot coil, manganese silicon, and ferrosilicon, which can comprehensively reflect the overall rise and fall direction of the black series, and is a barometer of the direction of the black varieties. As can be seen from this weekly chart, the black chain index has been characterized by a contraction triangle pattern since last year, and the volatility space is getting smaller and smaller, since June on the upper edge of the trend is very standard and began to meet resistance to fall, currently in the process of falling, the lower edge of the support is around 128, if the black chain breaks through the convergence triangle with the weakening of the US dollar, then the thread and iron ore will stop falling in the second half of the year to usher in a wave of clever rise.
Figure 2: Black chain index price chart
3. Market outlook for the second half of 2024
On the whole, the current domestic market has interest rate cuts and steel mills are expected to cut production, but the market has not responded, the current impact is greater or downstream demand, the current real estate start and infrastructure performance is weak, and is in the seasonal off-season, demand is difficult to improve in the short term, but the domestic macro policy is expected to increase, the probability of an overseas recession is not large, and the macro level of support for prices still exists. In the case of low domestic demand, the game between expectations and reality will be dominated by the market, and overseas demand will play a stabilizer role. Moreover, with the Fed's interest rate cut in the second half of the year, it is expected to stimulate a wave of upward movement in the commodity black series. Strategically, the price center of gravity in the second half of the year will move up compared with the first half of the year, and it is expected that the price center of gravity of threads will move up compared with the first half of the year. The operating range is 3400-4100 yuan/ton. (Lange Steel, Liu Jian)