The hottest scrap price may rise sharply in the se

Scrap prices may rise sharply in the second half of the year

the steel market in 2018 is destined to be an extraordinary year, not only because of the ups and downs of the steel market, the US dollar interest rate hike, and the topic of RMB depreciation seems to have never stopped. Since the central bank announced to improve the formation mechanism of the central parity rate of the RMB against the US dollar in August 2015, and the expectation of the US dollar interest rate hike in 2016, the RMB exchange rate has continued to depreciate against the US dollar, Recently, the continuous depreciation of the RMB has reappeared

it is understood that since June this year, the central parity rate of RMB against the US dollar has broken through the important thresholds of 6.4, 6.5, 6.6 and 6.65, and the spot RMB exchange rate once approached 6.7. The central parity rate was reported at 6.3305 yuan/US dollar on April 27, 2018, which was 0.75% lower than 6.2831 on March 27 at the beginning of this year. The central parity rate of the RMB against the US dollar yesterday was 6.6336 yuan/US dollar, down 3505 points from the beginning of the year. The cumulative depreciation of the RMB against the US dollar in July was 5.57% compared with the beginning of the year. Obviously, the continuous depreciation of the RMB has become the focus of the market. On July 3, the central parity rate of the RMB and the spot all returned to the decline again, with the central parity rate reduced by 340 basis points, which was the lowest since August 25, 2017, thus devouring the appreciation range since this year

it is expected that the RMB will further depreciate in the second half of 2018. Although there is no basis for sustained sharp depreciation, the current market generally expects the RMB exchange rate to be at 6 The lower limit of RMB exchange rate adjustment is 6.7

it is not difficult to find that the recent depreciation of the RMB and the possibility of continued depreciation are actually a correction to the higher valuation in the early stage. Its return to a reasonable level will have a certain partial impact on China's steel market. The reason is that the RMB continues to depreciate. The first affected in the steel market are imported ore and exported steel, because both of them involve the exchange of RMB and foreign exchange. At first glance, it seems that there is almost no import with the price upside down, but it is completely settled in RMB and has nothing to do with the scrap market, which mainly depends on domestic production and sales. In fact, the current trend of scrap steel is closely related to the trend of the steel market and the consideration of the cost of raw materials for steelmaking. Therefore, the market changes of ore and steel caused by the depreciation of the RMB will eventually affect the trend of the scrap steel market

second, increase the import cost of iron ore and benefit the value orientation of scrap

we closed at $63.95/ton with the 62% monthly average index of iron ore on July 3 (Note: the index is 0.15 higher than Platts, and the monthly average is 0.17 higher), which was converted to 401.80 yuan/ton at the central bank's central parity against the US dollar on March 27, the beginning of the year before the active depreciation; The median price of 6.6336 yuan/dollar on the 6th is converted to 424.22 yuan/ton, which means that the same ore sample continues to depreciate under the extended price, resulting in an increase of 22.42 yuan/ton in the cost of ore per ton

if the crude ratio of traditional ore steelmaking is 1.6, the cost per ton of steel will increase by nearly 35.87 yuan/ton. This means that a steel plant with an annual output of only one million tons only depreciates the RMB, and the annual cost of this year increases by nearly 40million. This reminds us of the "entry conditions for scrap steel processing industry", in which major steel plants go all out to enter the white list of adding the desktop horizontal static load test method when the desktop is irregular. This is because on June 24, 2015, the state finance and Taxation issued Notice No. 78, It is pointed out that the scrap steel produced or disassembled from scrap cars, scrap motorcycles, scrap ships, scrap electrical and electronic products, scrap agricultural machines and tools, scrap machinery and equipment, scrap daily necessities, industrial leftover materials, building dismantling materials, etc. will be used as steel-making furnace burden, and will enjoy a 30% tax rebate from July 1, 2016. This means that if an enterprise enjoys a 30% tax rebate and levies 10million yuan, it can save about 3million yuan of tax according to the principle of tax collection and refund immediately, excluding other local support policies. Three million can let the major steel mills fight for this white list urgently, not to mention 40 million

of course, at this stage, the scrap market has entered a rebalancing stage of supply and demand. Both the supplier and the demander have redefined the price system. Blast furnace steel mills have strengthened their voice in scrap pricing. More and more scrap steel enterprises enter the scrap steel processing access enterprises, and these enterprises will also have more say in the scrap steel circulation field. The price fluctuation of scrap steel is more flexible, and actively strive for the standardization of the white list of scrap steel processing access enterprises, which is also the trend of the form

(Note: at present, the domestic waste steel recycling system has not yet formed a perfect system, and the utilization rate is relatively low. As a resource, steel making with scrap can save a lot of energy consumption. Policy subsidies for scrap steel enterprises are also imminent. Although the current 30% tax rebate subsidy is not enough to enable large and medium-sized scrap steel processing enterprises to reverse the current situation of retail investors as the king of the industry, all preferential policies will also be extended to these enterprises in the future The industry is inclined. At present, retail investors cannot rely on the price advantage of non Invoicing at both ends to compete with large and medium-sized enterprises. Now the tax invoice inspection of the scrap industry is tightened, and the competitiveness of retail investors is greatly reduced. The process of steel enterprise restructuring is actually the process of continuous improvement of scrap steel reminders.)

then I still want to emphasize that 4000 is definitely a cost pressure that can not be ignored for steel mills in today's environment where environmental protection leads to the normalization of production restriction of steel enterprises. Then steel mills will also have to re-examine the heavy cost problem

of course, this 40million is only the cost pressure converted from the current index and the central parity rate of RMB against the US dollar. In the future, with the rise and fall of ore and the fluctuation of exchange rate, the cost pressure will also change. The cost pressure on steel mills after the devaluation of the RMB is indeed real. Since the capacity reduction in 2016, steel mills have still begun to deliberately increase the amount of scrap to reduce the cost pressure caused by ore. of course, this also stems from the fact that scrap is also a good raw material for increasing steel production capacity. Especially driven by the increasing pressure of green environmental protection, the import proportion of high-grade iron ore continues to increase. In the future, the greater the pressure on environmental protection and the stricter the supervision, the more high-grade iron ore will be imported. Undoubtedly, the depreciation of RMB will correspondingly increase the import cost of iron ore, resulting in the strengthening of the resistance of scrap steel to fall. This explains the dilemma of scrap steel price in China recently, because both long process steel-making enterprises and short process steel-making enterprises will use scrap steel in different proportions, and the comprehensive profit and cost include productivity utility. At this stage, scrap steel price enters the game stage: high ore price benefits scrap steel, but vice versa

third, stimulate steel exports and affect the depreciation of the RMB that has occurred in the terminal waste

will make China's steel exports in the second half of 2018 have more exchange rate advantages than in the past. In other words, with other conditions unchanged, China's steel export price will be cheaper in 2018, so it can enable China's steel exports to offset trade friction to a certain extent. Although the rise of world trade protectionism and the continuous Sino US trade war have worsened China's steel export environment. However, the moderate depreciation of RMB can offset the negative impact of high tariff barriers to a certain extent, which is conducive to China's steel exports, including its direct and indirect exports. Moreover, the moderate depreciation of the RMB will also improve the indirect export competitiveness of China's automotive, marine, machinery, household appliances and other mechanical and electrical products, and promote the indirect export of China's steel

in this way, China's export steel manufacturing industries such as machinery, household appliances, ships and automobiles will also be improved. The improvement of exports will increase the demand for steel products in the relevant steel manufacturing industry, improve the domestic sluggish steel market demand environment, and digest the bad off-season. At that time, the price of steel products will reach a new high level, and the price of scrap steel will also rise by a large margin to open up innovation

policy factors, supply-demand relationship and cost are the three important factors that determine whether the scrap of the same reason in the steel market can catch fire in the second half of 2018. Steel traders need to calmly observe the correlation of these three interests

IV. take the recent scrap market as an example

the scrap market is actually in a situation of strong demand and short supply, which also supports the scrap price to a certain extent. But at the same time, due to the macro contraction and the impact of the Sino US trade war and the blue sky defense war, the overall trend of the current market is weakening, and the profits of steel mills are shrinking. This has affected the scrap price to a certain extent. Since June, the scrap steel market has experienced ups and downs, but it is not difficult to find that the reason why scrap steel has continued to rise and fall is not only due to macro, finished products, environmental protection and other factors, but also due to the gradual recovery of molten iron costs, the tight supply of pig iron market and the reappearance of scrap steel demand in steel mills; The profit margin of blast furnace is acceptable, and a few steel mills have added scrap again to increase the output of molten iron

recently, there have been fluctuations in the scrap market. Environmental protection and high pressure have led to the abnormal operation of many base wharves, the reduction of industrial scrap output, the low liquidity, and the sharp reduction of scrap resources available for processing. In addition, the arrival of the plum rain season has affected the transportation, collection and storage of scrap steel. Some steel mills have raised the scrap steel price to attract resources, especially in the south, the price rise is obvious, and the trend of the scrap steel market is quite confused. In addition, it is understood that with the completion of the upgrading and transformation of some electric arc furnace steel plants and the completion of environmental protection inspection, the operating rate and capacity utilization rate of electric arc furnace steel plants will be further improved (mainly concentrated in the southwest and North) and the demand for scrap steel will remain strong

on the whole, there is no obvious contradiction in the fundamentals of the scrap market at present. From the inventory situation to the price level, it is in a balanced state. The pessimism of large scrap traders in the market has eased, the shipment speed has slowed down, and the arrival volume of steel mills has decreased. In the short term, scrap steel remained stable and moderately strong. In the second half of 2018, given that the current capacity release of long process steel enterprises is close to the peak, the increment of "increasing waste by waste" is limited; It mainly focuses on electric furnaces, and the release degree of electric furnace steel production capacity has uncertain factors. However, as far as I know, from July 5, the "look back" action of environmental protection in various regions will come to an end. The main affected areas are the South China market, and some enterprises will gradually resume normal production. At present, Xuzhou, Shandong and Handan have resumed production or will resume production in succession. Hebei and southwest have planned to continue to put into production a batch of electric arc furnaces. At present, electric furnace steel also has a profit of more than 500 yuan. Steel mills have high enthusiasm for production. They can expand production by improving the quality scrap entering the furnace. It is expected that the scrap market in the second half of the year may be better than that in the first half of the year

in conclusion

although there is no basis for the continued sharp depreciation of the RMB, although there is limited room for continued depreciation in the future, although the competent authorities will not actively devalue 4. The interface on the plug-in controller must turn off the power of the controller's local currency, the devaluation of the RMB that has occurred will objectively have two beneficial effects on China's steel market, namely, stimulating steel exports, Increase China's total steel demand and increase the import cost of iron ore, forming a strong support for domestic steel prices. Although the impact of RMB devaluation on the steel industry has both advantages and disadvantages, the impact on the scrap market is more difficult except for the originally bleak and even banned import scrap market. From the two aspects of ore import and steel export, the moderate depreciation of RMB will do far more good than harm to the domestic scrap market. After all, the scrap market after devaluation will increase the production terminal demand of more steel mills, and is expected to usher in an opportunity to rise sharply with the recovery of the steel market in the second half of 2018. The short-term stability is strong, and the medium and long-term market price may rise, RMB