Big News! Interest Rate Cut Cycle Begins! Over 90% of Steel Mills Decline! Will Steel Prices Have No Way Back?

Special attention has been given to the recent issuance of RMB 64.4 billion in fiscal subsidy and grant funds by the Ministry of Finance for the 2024 fiscal year, designated for the central fiscal subsidy for the "cash for old" program in the automotive sector. The May Caixin China Manufacturing PMI index.

Special Focus

The Ministry of Finance recently allocated 6.44 billion yuan in interest subsidy and grant funds for 2024, designated for the pre-allocation of the central government's subsidy for the car scrappage program in 2024.

The May Caixin China Manufacturing Purchasing Managers' Index (PMI) reached 51.7, up 0.3% from April, the highest since July 2022, indicating a faster expansion of manufacturing business activities.

PART 01 Industry News and Analysis

01 Real estate companies see a larger decrease in land acquisition.

According to the China Index Academy, from January to May, the total land acquisition amount of the TOP100 enterprises reached 314.6 billion yuan, a decrease of 26.7% year-on-year, with a further expanded decline compared to January to April. Central and state-owned enterprises remain the main force, which is directly related to the relatively better financial conditions of these stable state-owned corporations.

Analyst Perspective: In April, the Ministry of Natural Resources issued a notice requiring urban land supply to align with the devaluation cycle, leading to a decrease in land acquisition by real estate developers. The continuous introduction of a series of housing market policies has had a limited impact on the market and the economy in the short term. It is bearish for steel prices.

02 Coal Mine Accident Strikes Again

According to relevant departments in Ningyang County, Taian City, Shandong Province, a water-intrusion accident occurred at the Shandong Energy Huafeng Coal Mine located in Ningyang County, resulting in 8 people trapped. Rescue operations are ongoing.

Analyst Perspective: All mines in the Shandong Taian area and under the Newwen Mining Group have halted operations for safety inspections, affecting a total production capacity of 14.4 million tons. With the peak coal consumption season underway, sentimentally, this provides some short-term support for coke prices.

03 The European Central Bank leads the way in cutting interest rates.

On June 6th, at the monetary policy meeting, the European Central Bank will fire the starting gun for major central banks to cut interest rates. The ECB's rate cut in June is a done deal, but plagued by high inflation, weak growth, and exchange rate volatility, it is expected to lower rates only once a quarter rather than monthly.

Analysts' Perspective: With the European Central Bank (ECB) all but certain to cut interest rates by 25 basis points after maintaining high rates for 22 consecutive months, recent actual demand has significantly mitigated concerns over global economic uncertainty, leading to a correction in commodity prices and a continued weak and volatile trend in the short-term black commodities market.

PART 02 Market Overview

Steel Mill Price Adjustment: Weak Operation

As of June 3, according to data from the Information Research Institute of Zhonggang.com (WeChat Official Account: Zhonggang.com), a total of 20 steel mills adjusted their prices today, including:

19 reduced, accounting for 95%, with a price adjustment range of 10-80 yuan/ton.

One company, accounting for 5%.

PART 03 Futures · Billet Market Update

On June 3rd, the black series continued to decline, with rebar closing at 3,665 yuan, down 50 yuan; hot rolled steel closing at 3,800 yuan, down 40 yuan; coking coal closing at 1,696.5 yuan, up 14.5 yuan; coke closing at 2,269 yuan, down 39.5 yuan; and iron ore closing at 843.5 yuan, down 23 yuan.

As of June 3rd, certain common billet resources in Qian'an, Tangshan, maintained a stable price of 3470 yuan per ton, inclusive of tax for factory delivery.

June 3, Underperforming (Zhonggangwang's large database)

PART 04 Steel Price Forecast

Real estate and other economic indicators remain weak, macro expectations speculation has ended, and the marginal effect of new policies is limited. This year's economic recovery has been bumpy, with steel prices experiencing wider fluctuations and the profit margin for steel continuously shrinking,压制ing the trend of steel prices.Steel prices are expected to remain stable or slightly decline today.