Looking at the steel market throughout February, the slow resumption of work by downstream companies and logistics transportation have led to the continued obstruction of the circulation and digestion of steel resources, so the inventory of steel stocks continued to build up throughout February.

In February 2020, affected by the epidemic, China's manufacturing purchasing manager index (PMI) was 35.7%, a decrease of 14.3 percentage points from the previous month. From the perspective of enterprise scale, the PMIs of large, medium and small enterprises were 36.3%, 35.5% and 34.1%, down 14.1, 14.6 and 14.5 percentage points from the previous month. From the perspective of sub-indexes, the five sub-indexes that make up the manufacturing PMI are all below the critical point. Among them, the production index was 27.8%, a decrease of 23.5 percentage points from the previous month, indicating a slowdown in manufacturing production activities. The new orders index was 29.3%, a decrease of 22.1 percentage points from the previous month, indicating that the demand for the manufacturing market fell. The employment index was 31.8%, a decrease of 15.7 percentage points from the previous month, indicating that the employment level of manufacturing enterprises has decreased.

Delay in the start of demand has led to a sharp increase in steel stocks. As of February 27, the stocks of the five major steel mills + social stocks have reached 37.181 million tons, which is still in an upward channel. However, in the face of the huge inventory pressure of 37 million tons of steel stocks, major steel companies have cut their production and repaired their own equipment. And this week (2.24-2.29), the growth rate of total inventory has decreased compared with last week. Among them, the output of rebar was 2.143 million tons, a year-on-year decrease of 25.63%, and a decrease of 21.50% compared to the pre-holiday period, indicating that the effect of the reduction measures is acceptable.

According to the information released by the National Development and Reform Commission, since the outbreak of the new crown pneumonia epidemic, the National Development and Reform Commission and the China Logistics and Purchasing Federation have actively guided national logistics hubs to participate in epidemic prevention and control, providing support and guarantee for the transfer of emergency supplies and the supply of civilian biological resources in various places. And took the lead to resume work and resume production. As of February 26, all 23 national logistics hubs have opened and operated, of which 15 hubs in Tianjin, Taiyuan and other places have not been closed during the Spring Festival. The operating rate of most of the hub's enterprises has reached 70%, and the number of employees has reached 60%, which is higher than the industry average. Level. Data from the National Development and Reform Commission showed that as of February 25, the rate of restart of 533 major transportation projects nationwide was 70.17%. Among them, there are 37 railway projects with a restart rate of 75.68%; 459 expressway projects with a restart rate of 70.38%; 7 Yangtze River trunk channel improvement projects with a restart rate of 71.43%; 30 airport projects with a restart rate The rate is 60%.

Assuming that the time required to resume production to production is about 2 weeks, it is expected that the recovery rate of downstream terminal enterprises will reach a relatively normal level in mid-March. Based on this calculation, the epidemic situation has delayed the production start of the project by 30-40 days. When the project progress is completed on time, measures will be taken to rush work. At the same time, after the epidemic, real estate companies' risk awareness will be strengthened, and capital turnover will be accelerated. Real estate companies will inevitably adopt a "high turnover" strategy to accelerate the progress of project construction. In particular, 2020 is the year of building a well-off society in an all-round way and ending the "Thirteenth Five-Year Plan" period. The counter-cyclical adjustment policy originally this year will be strengthened. Now if we want to eliminate the impact of the epidemic on the economy, then the government's countercyclical adjustments in infrastructure, real estate, manufacturing, and currency liquidity will be further strengthened. This shows that steel consumption is expected to rise sharply in the middle and late March, and steel products will continue the original rise in the medium and long term. However, the huge pressure of steel stocks has reached 37 million tons. Fundamentals cannot be ignored. In particular, steel mill stocks have doubled the previous four-year high, so prices may still be lowered in the short term.

To sum up, SunSirs analysts believe that the steel price rise and fall during the destocking period depends largely on consumption, that is, the release of downstream demand. However, in the face of huge inventory pressure in the short term, the inflection point of short-term steel stocks has not yet arrived. Under the circumstances, in order to maintain liquidity and relieve pressure, steel companies will inevitably choose appropriate price reduction sales, so steel prices will continue to fall in the short term, and after the bottom has been reached again, steel prices will start a new round of rebound or even reverse. It will return to the uptrend in the long run.

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