In November 2016, the PMI of China's steel industry was 45.2%, a slight increase of 0.1 percentage points compared to the previous month. Although it has remained below the boom and bust line for six consecutive months, from the perspective of sub indicators, both the inventory index of waste materials and the inventory index of raw materials have shown an increase, indicating that the two major factors that caused the previous price collapse are quietly changing. In addition, the significant increase in the raw material procurement price index indicates that the cost of the steel industry chain will still remain high in December, and changes in output will also lead to market expectations of a later decline in supply. At the beginning of December, despite the market maintaining a strong and volatile situation, the supply-demand contradiction has not changed much, and the bottom price of hot rolled plate coils in the market has still moved up. So, how will Wuhan Iron and Steel adjust its futures price policy for January 2017 hot rolled plate coils in the future? Next, based on some fundamental factors, the author briefly discusses and predicts with everyone:

1、 The significant increase in spot prices in the market indicates that price performance remains strong

As of December 9th in the spot market, the price of Wuhan Iron and Steel 4.75mm hot rolled plate coil in Wuhan region is 3750 yuan/ton. Compared to the market price of 3450 yuan/ton on November 11th, the cumulative increase has reached 300 yuan/ton. From the comparison of average prices, the monthly average price of Wuhan Iron and Steel Co., Ltd.'s general coil market has increased by about 471 yuan/ton month on month. Compared to other markets in the country, its increase is still greater than the price increase of ordinary rolls in the Shanghai market. High carbon chromium iron powder

On November 11th, Wuhan Iron and Steel Group raised the futures price of hot rolled steel plates and coils for December by 400 yuan/ton without tax. Currently, the factory price of 4.75mm * 1500mm Q235 hot rolled steel plates and coils is 3780 yuan/ton (excluding tax), and the price including tax is 4422.6 yuan/ton. If the maximum discount that the corresponding agency agreement can obtain is reduced, the futures cost price of the mainstream specifications of Wuhan Iron and Steel Hot Rolled Plate and Coil will continue to be approximately 4118.4 yuan/ton (including tax). Compared to the monthly average price in the Wuhan market, the market price fluctuation is about 368.4 yuan/ton, and the difference between the spot price of ordinary coils and the futures price of steel mills is further reduced, indicating a stronger market price trend.

2、 Steel Mill Order Saturation December Wuhan Iron and Steel Hot Coil Pricing and Selling Price Drive Each Other High Carbon Chromium Iron Powder

Under the sustained strong market situation, it is reported that the order volume of steel mills is also relatively saturated, with a total order volume of 90000 tons in November and December in the East China region. In January, merchants made early reservations at the end of November and shipped in January 2017. Therefore, it seems that there will be a concentrated replenishment of resources in January 2017, which may slow down the supply pressure of resources in other regions.

In addition, spot companies adopt a daily pricing guidance sales form for ordering. According to tracking, from November 11th to December 9th, the daily guidance price of Wuhan Iron and Steel Spot Company has accumulated an increase of 250 yuan/ton, which is slightly lower than the spot sales market price. As of December 9th, the selling price of Wuhan Iron and Steel Co., Ltd.'s general coil in Wuhan is about 40 yuan/ton higher than that in Shanghai. Based on the comparison of prices over the past month, the prices of general rolls in Wuhan region are fundamentally higher than those in Shanghai region, but the range is consistent with the normal price difference between the two regions. In addition, the prices in Shanghai region are more sensitive to the impact of futures, and the fluctuation of prices is more significant.

3、 Raw material prices continue to rise, consumption costs tighten steel mill profits

According to the average price changes of raw materials during the bidding period of Wuhan Iron and Steel Corporation (October 11-November 9 and November 10-December 9), as of December 9, the average price of foreign ore is about 77.26 US dollars per ton, while the price of coke is about 2065 yuan per ton. The monthly average price of the 62% grade Australian fine ore CFR price index monitored by Mysteel has increased by approximately 15.31 US dollars per ton compared to the previous period's average price; The average price of coke increased by about 370 yuan/ton month on month. Based on the cost calculation of hot rolling types, the cost price of the latest steel mill's hot rolled plate coil is approximately 260 yuan/ton higher than the cost price of the previous cycle (this value is calculated by the author based on raw materials and is for reference only). From this perspective, the prices of raw materials continue to rise and remain high, but the increase is slightly lower than the spot market price. The bottom of steel mill consumption costs continues to move up, and the profit margin of steel mills remains tight. From the perspective of steel mills' consumption costs, the increase in spot prices continues to stimulate steel mills to significantly increase their factory prices.

4、 Steel mill production increased month on month and inventory decreased by a narrower margin

It is understood that the production of hot rolled commercial materials in Wuhan Iron and Steel Group in December increased by approximately 2.8% compared to the actual production in November, and the total detailed internal supply decreased by approximately 11.3% compared to the total production plan in November; Steel mills have more saturated orders for hot rolling and various types of steel, and the proportion of general coil orders has relatively increased. From the perspective of separating steel factory inventory, the month on month inventory in the factory decreased by about 0.3%, and the overall total inventory in the factory remained relatively low, resulting in a limited decrease. (The above month on month data is based on the official data of the steel factory and is for reference only). From this perspective, the production of steel mills has increased month on month, while the total inventory has slightly decreased month on month. From the perspective of supply pressure, with forward supply saturated with orders, market pressure is expected to ease, and the expected adjustment of price policies in January constitutes a supportive upward signal.

Overall, in the context of moderate demand activity, continued upward movement of raw material costs, tightening of steel mill profits, and slowing sales pressure, it is estimated that Wuhan Iron and Steel Group's hot rolled coil price policy in January will continue to significantly increase, with a detailed range of 200 to 300 yuan/ton (excluding tax).