As the steel spot market continued to rise last week, downstream users also maintained a wait-and-see attitude and mostly purchased on demand. According to convention, July and August every year are the time when the steel market actively destocks. The main factor is the shutdown of steel plants for maintenance. Since July this year, steel inventories have continued to decline.

Some steel traders reported that since mid-July, construction steel resources in the steel market have been relatively tight, and many steel mills have basically closed direct supply at noon, which has indirectly led to a slight increase in current steel prices. 4,000 yuan/ton. Whether this situation can be maintained depends on the demand situation in the steel market.

We believe that the biggest focus of steel demand in the second half of the year is not the growth of infrastructure steel, nor the country's upcoming steel overcapacity reduction policy, but the increase in steel market demand brought about by the "guarantee" policy. "Delivery of buildings" promotes the resumption of work on construction sites. The good news in these three aspects is slowly fermenting, which is also the driving force behind the recent rebound in steel prices.

1. The “guaranteed housing delivery” policy in various places is accelerating, and the increase in demand for steel is looming.

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The high-level meeting emphasized the need to stabilize the domestic real estate market and proposed strengthening local government responsibilities to ensure delivery, people's livelihood, and stability. Guaranteed handover is a shot in the arm to solve the current difficulties in the real estate industry, and is of great significance to stabilizing the real estate market and restoring confidence.

Since the second half of last year, most real estate developers have been facing huge financial pressure, resulting in the failure of many properties to be delivered on time, causing trouble to home buyers. The most important thing is that potential home buyers have lost confidence in real estate developers, and the property market has fallen into a vicious cycle: consumers wait and see - houses cannot be sold - developers have no money - properties cannot be handed over.

Recently, with the joint efforts of local governments, financial institutions and real estate companies, various funds have accelerated their support for real estate developers. On the evening of July 29, Evergrande Group announced on its official website that as of now, there are 732 construction projects across the country, 579 projects have resumed work and reached normal construction, and 126 projects are resuming construction; on August 4, Kaisa Group It was announced that work on the suspended buildings would be fully resumed and efforts would be made to deliver the buildings on time.

Looking at Evergrande Group alone, 732 construction projects have resumed work. The number of buildings guaranteed to be delivered across the country should be a huge number. With the resumption of a large number of construction projects, the demand for construction steel in the second half of the year will continue to increase for a long time, which will also form a strong support for the trend of steel prices after August.

2. The National Development and Reform Commission requires that we seize the peak construction season in the third quarter to accelerate the construction of major projects

The National Development and Reform Commission held the first meeting of the coordination mechanism to promote effective investment in important projects. The meeting pointed out that our country's economy is in a critical window for stabilizing and recovering, and the third quarter is crucial. Actively expanding effective investment is an important support for stabilizing the economy. Accelerating the construction of major projects is a major deployment that will benefit both the present and the long-term.

The latest construction activity index released by the National Bureau of Statistics in July was 59.2%, an increase of 2.6 percentage points from June. Domestic construction production activities have accelerated, indicating that the construction of infrastructure projects has accelerated and the steel market demand has rebounded.

3. The steel overcapacity reduction policy is about to be implemented, and the reduction in supply will support steel prices.

Recently, He Wenbo, executive chairman of the China Iron and Steel Industry Association, said: In the second half of the year, all steel companies must insist on organizing production according to actual needs.

In the first half of the year, the National Development and Reform Commission has made arrangements. Domestic steel production capacity this year cannot be higher than last year. Some market analysts said that steel production capacity is expected to decrease by about 30 million tons this year. Steel prices have been on a downward trend since the beginning of the month.

To sum up, last week some coke companies proposed to increase the ex-factory price of coke by 200 yuan/ton for the first time, but they were resisted by large northern steel mills and failed to be implemented. Taking advantage of the Ganqimao epidemic this week, Mongolian coking coal cannot be imported normally, and coke production companies will definitely increase again, and it is expected that the price will increase.

Next, as various types of funds continue to be injected into real estate companies, the pace of real estate resumption of work and production will be further accelerated, which will also bring greater growth to the steel market during the "Golden Nine and Silver Ten".