The "black series" futures of steel winter storage have shown active performance as they gradually warm up from cold

The sluggish steel market since the fourth quarter of 2021 has continued to recover recently. As of the closing of the domestic futures market on the afternoon of January 20th, iron ore and rebar futures closed at 742 yuan/ton and 4713 yuan/ton, with monthly increases of 10% and 9.6%, respectively. In the spot market, the prices of steel products such as rebar and hot-rolled coils continue to rise.

Industry insiders have stated that multiple national plans for the 14th Five Year Plan have been released recently, and the clear direction of stable growth policies by various ministries has boosted market confidence. In addition, the domestic steel market's winter storage has also come to an end, and the winter storage market has gradually become relatively active from the cold at the end of December, reflecting the rising expectations of steel mills and steel traders for a rebound in the steel market in the first quarter.

"Recently, the combination of policies to 'stabilize growth' has strengthened the industry's confidence in investment and domestic demand growth in the first quarter." A person in charge of a steel trading enterprise in Hangzhou told a reporter from Shanghai Securities News, "Although the steel winter storage market this year is not as good as in previous years, it has shown a process of recovery from cold, mainly due to the role of policy efforts."

Winter storage refers to steel traders purchasing steel at a low price in winter and reserving it in advance, waiting for the steel price to recover in the coming year before selling it to earn profits. According to incomplete statistics, as of now, more than 50 steel mills in China have announced their winter storage policies for this year. Overall, this year's Spring Festival is early, and the winter storage inventory cycle is relatively short. Winter storage prices are generally higher than last year's overall level and the same period in previous years, and have risen over time, reflecting the gradually optimistic attitude of steel mills and steel traders towards future steel prices.

Wan Chao, a construction steel analyst at Shanghai Ganglian Steel Business Unit, told Shanghai Securities News that steel mills generally have low inventory due to factors such as compressed crude steel production. This year's winter storage policy mainly focuses on price locking, with post settlement as a supplement. According to research, currently winter storage generally has a good volume of orders, whether it is for price locking or post settlement.

"The recent positive news at the macro level has repaired the previous pessimistic expectations in the futures market." Wan Chao said, "Steel mills have less resources to provide winter storage than in previous years, and futures discounted spot prices have increased the market's enthusiasm to buy winter storage in futures."

For the future, Wang Jing from Lange Steel Research Center stated that it is expected that steel demand will improve in the first quarter, but the expectation should not be too high. Infrastructure construction is expected to steadily increase in the first quarter, and the probability of steel demand expansion is relatively high. The downward trend of real estate investment has not yet reversed, with new construction and construction areas continuing to grow negatively. It is expected that the demand for steel in real estate development and construction will rebound seasonally after the Spring Festival, but the seasonal improvement in demand intensity is weak.

Wan Chao stated that projects that were affected by funding issues last year are expected to accelerate completion after the end of this year. Under the stimulus of macroeconomic policies, the demand for steel in the post holiday real estate sector is expected to quickly recover, and the demand for steel in infrastructure is expected to increase. (Source: China Securities Network)

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