Optimization of production capacity gradually landing rebar downtrend slowed down to support coke

After the National Day holiday, Shanxi capacity optimization program and the Yangtze River Delta production restrictions landing

After the National Day holiday, Shanxi capacity optimization program and the Yangtze River Delta production restrictions landing, supply expectations for the “re-correction,” coking enterprises overall production restrictions or to maintain a neutral strong, at the same time, in the context of stability, the downgrade hedge trade friction disturbances. 10-November demand is expected to stabilize in the first half of the year. 2018 seems to be a replica of last year, the follow-up is also expected to fulfill the script of “production restrictions on the stage, the cycle of history”, coke is still mainly to do more, targeting the former high of 2700 yuan / ton.

Capacity optimization is gradually falling into place:

Recently, Shanxi Province issued “Shanxi Province coking industry to fight pollution prevention and control to promote the implementation of the transformation and upgrading program”, clear requirements for strict control of coking production capacity, optimization of industrial structure, environmental protection, special emission limits to meet the standard, coking supply is expected to “re-correction”; the end of June, the three-year plan for the defense of the blue sky in fact, has been put forward! “Steel to set coke” capacity optimization program, but the market is expected to think that the capacity involved is too large, the implementation of the landing is more difficult, coupled with the late environmental protection corrective, the abolition of production restrictions ‘across the board’, coking supply is expected to weaken rapidly, fell sharply.

According to the calculation, according to the proportion of steel to determine the implementation of coke capacity to go, the national region needs to phase out 146 million tons of coke production capacity, accounting for 25% of the country; blue sky defense key areas need to phase out 0.8 billion tons of coke production capacity, accounting for 14% of the country; independent coke enterprises in the 4 meters and the following capacity of 190 million tons, accounting for 32.3% of the country; the potential focus on the elimination of production capacity (independent coke enterprises to meet the 4.3 meters and below, capacity of 1 million tons and below and wet quenching process coke oven production capacity) for 0.71 billion tons, accounting for 12% of the country. Potential key elimination capacity (coke oven capacity of independent coke enterprises with capacity of 4.3 meters and below, capacity of 1 million tons and below and wet quenching process) is 0.71 billion tons, accounting for 12% of the country. Overall, capacity optimization on the degree of impact of coking can not be underestimated, in the context of tight balance, coke prices will remain strong.

Rebar decline slows down to support coke

The difference between the supply side of coke determines its own elasticity, and rebar, as the most important downstream of coke, its rise and fall determines the direction of coke. Environmental protection, the general direction of the corrective cancellation of “one size fits all”, production restrictions weakened no doubt, but the total amount of production restrictions still need to be proved. According to agency statistics, production restrictions after corrective action from 50% down to 36% -45%, taking into account the regional expansion (Yangtze River Delta + Fenwei), as long as the production restrictions to reach 2/3, the degree of impact will also be greater than last year.

Supply side, from the crude steel daily average does show a higher increment, the highest year-on-year increase also reached the level of 8.9%, but the data need to deduct the ban on intermediate frequency furnace after the table to the table of production, a conservative estimate of 7%, the actual increment in 2%-3%, so the supply side of the pressure is not as big as imagined.

Demand, in addition to the manufacturing sector is slightly weaker, real estate forecast in the October-November period will remain resilient, infrastructure in the context of stabilization of the marginal increment will also gradually highlight. Micro-demand data performance also reflects the current demand for good, the latest issue of wire screw procurement went up to a high of 37,000 tons, the country's steel transactions also broke through a new high.

In terms of basis differentials, environmental corrections and pessimistic macro expectations put rebar at its maximum year-on-year discount, giving a strong margin of safety. Eventually, the overall inventory level of rebar remained low year-on-year, and spot prices remained high.

Overall, rebar continues the pattern of “low inventory + high basis + stable demand”, is expected to maintain the oscillation upward trend in the October-November interval, the coke price support.

Inventory structure optimization is good

First of all, the mood of traders to replenish stocks is a leading indicator. Port inventories, as a reflection of restocking, show a strong positive correlation with spot prices, which can be used to verify the direction of futures prices. With the decline in coke prices in the previous period, port inventories significantly de-stocking digestion, the current value of 2.33 million tons, down another 70,000 tons from the previous period. Considering the change in the caliber of the previous period, trader inventories have been at historic lows, and the short-term pressure was quickly released.

Secondly, the coke enterprise inventory, the previous continuous accumulation of the background also corresponds to the decline in coke prices, showing a strong negative correlation. With the Shanxi coke price rise (range of 100 yuan / ton), coke enterprise inventory accumulation rate is also expected to gradually slow down or even downward, once again support coke prices.

Finally, from the mainstream steel mill inventories, the overall is also in a neutral low position, and did not accumulate significantly. Although blast furnace production restrictions on coke demand negative, but in the case of terminal stabilization, coke inventory demand will also maintain a certain toughness.

With the post-holiday mainstream coking coal mines raised significantly, superimposed on its own coal mine inventory has been at historic lows, coking coal spot firm. At the same time, the central bank cut to hedge against trade war disturbances, coking coal lift sentiment is strong. The previous period has been as a short configuration of coking coal from the cost side of the coke also formed a support.

From a comprehensive point of view, environmental protection production restrictions superimposed on the gradual realization of capacity optimization, the downstream rebar or oscillating upward to form support, port inventories rapidly depleted after replenishment of stockpiles again, upstream and downstream inventories are benign, the cost side of the coking coal spot price support, coke is expected to hit 2700 yuan / ton pre-high.

After the National Day holiday, Shanxi production capacity optimization program and the Yangtze River Delta production limit landing, the supply is expected to “re-correction”, coking enterprises overall production limit or maintain a neutral strong. At the same time, in the context of stabilization, downgrade hedge trade friction disturbances, October-November demand is expected to stabilize. 2018 seems to be a replica of last year, the follow-up is also expected to cash in on the “production restrictions on the stage, the history of the script”, coke is still to do more, the target of the former high of 2,700 yuan / ton. The demand for coke is expected to stabilize in 2018, which seems to be a repeat of last year.