China's steel market central bank lowered its contract

On the evening of February 4, 2015, the People's Bank of China decided to reduce the deposit reserve ratio of financial institutions by 0.5% starting from February 5. At the same time, support for small and micro enterprises, agriculture, rural areas, and major water conservancy projects will be increased. The urban commercial banks and non-county rural commercial banks that accounted for directional declining standards for small and micro enterprises will be reduced by an additional 0.5% to China. The Agricultural Development Bank lowered its standard by 4 percentage points.

When the news came out, the market immediately boiled, and the long-awaited deadline finally came out. The repressed mood finally had the opportunity to be released, as if for a time the steel market immediately reversed the trend. How can the facts be? Is it really the current steel market's life-saving medicine? Let's take a look at it together.

This time, from the last time that the central bank adjusted the deposit reserve ratio on May 12, 2012, it was nearly two years and seven months. See Chart 1. It can be said that the time limit for the adjustment of the deposit rate has been the longest in recent years. It also reflects the relatively cautious use of domestic monetary policy in the current economic situation. The introduction of loose monetary policies such as RRR cuts will help increase liquidity and play a role in stabilizing the current economic situation. From the overall perspective, it is undoubtedly good news.

Since it is good, will it quickly stimulate the market rebound? Let's take a look at the changes in the market price of steel products after several RRR adjustments since 2011, as detailed in the chart below. Taking the Shanghai market rebar as an example, six times after 2011, the price was flatted twice in a working day after the announcement, falling four times, with a decrease of RMB 10-20 per ton. In the last three working days, it has risen 2 times, both at RMB 10/t; it has been flat for 1 time; it has fallen 3 times, with an increase of RMB 20, 50, and 100/t respectively. It can be said that the performance of the market was generally weaker and the funds were received. Tight expectations still have some impact on market confidence.

Raise the Likong Steel City, so cut it? We have found that a total of four reductions have been made since 2011, and the first three reductions have been made. After rebar, Shanghai rebars twice in a single working day, once at a price of RMB 20/t; once in the last three working days, it has risen to RMB 20/t. The remaining two are down, respectively 20 and 50 yuan / ton, it can be seen that the RRR also did not bring immediate improvement effect to the steel market, but the market has a large decline. In this case, how the market reacts to the current quotation is still unknown. Although there is a possibility of repressing the long-term borrowing trend, it is also likely to continue to weaken due to the general trend.

Judging from historical statistics, there is little impact on the short-term steel spot market. For this time, the author believes that the market has been in a weak position for a long time. The central bank will let the water out and the market should have positive performance. With the continuous accumulation of the number of cuts and interest rates, the positive effects of the policy will continue to show. At present, the impact of the demotion of the node on steel will be mainly reflected in March and April after the Spring Festival. First of all, the recent domestic steel market prices have stabilized signs of stabilizing, and the easing of funds will help restore market confidence, and the market may further stabilize or even slightly increase. Secondly, the current steel prices are relatively low. The lowering of allowances will help ease the tension in the industrial chain. After the holiday, the release of demand will stimulate the steel market to pick up. As a result, this reduction should be reflected in the medium and long-term results.

On the spot operation level, it is not recommended to increase inventory. For most distribution companies, after painful destocking and deleveraging adjustments in recent years, even if there are currently better expectations, the market needs a longer process to improve. Therefore, it is not recommended to increase inventory for the coming year. Specifically:

First, the current pattern of supply and demand in the market has not changed much. In 2014, the domestic crude steel production of 822.7 million tons will not be lowered to a low level. The downturn in the demand side and the contraction in exports may also affect the domestic steel market for a long time. Supply and demand balance, which will also restrict the price of steel is difficult to bottom out.

Secondly, it has been less than half a month before the Spring Festival. Most of the downstream customers have entered a large-scale work stoppage period about a week before the holiday. During the Spring Festival, the market has a period of at least half a month's demand stagnation. However, there will be no shipments from the steel mills. Shrinking. As a result, market inventories will increase passively during this period. Therefore, the slow recovery of the demand side after the holidays and the increase of resources on the supply side will put pressure on the market.

In addition, the focus of this budget reduction on small and micro enterprises, agriculture and rural areas and major water conservancy projects to increase support for the bulk of the industry to be how much support remains to be observed, so the blind move will only make themselves more passive.

Judging from the reaction of the ** market, with the opening of the current steel market in the night, after the news was released, black-related products such as rebar, hot-rolled iron, iron ore, and coke coal coke were involved in the night trading process. There was no rapid flushing. Instead, they all oscillated within a narrow range below the settlement price on the 4th. It can be seen that the market has already digested expectations for a lowering rate. More influence may have to look at the performance of the Japanese market today.

In general, although the RRR slightly exceeds market expectations, it is still within expectation. The impact on the short-term steel market is limited and it will have a more positive impact on the medium and long-term markets. I suggest that market investors continue to maintain the flexibility of funds, and maintain the current circulation means of rapid entry and exit is the top move, must not blindly buy goods ** market.