Monthly Report | Iron and steel production recovers, steel prices swing in narrow range

Since April, steel supply and demand has seen some marginal improvement. On the one hand, the sharp decline in raw material prices in the previous period has improved the immediate profits of steel mills, and the expectations of steel mill reproduction have recovered, leading to favorable prices for the entire industrial chain. On the other hand, with the sustained rebound in steel prices, downstream cargo take-up has improved, market closing has gradually improved, and the market has gradually turned from negative feedback to positive feedback. However, it is worth noting that the speed-up of steel mill reproduction has again pushed up furnace feed prices, and steel mill profits have not yet effectively improved in the short term, and the sustainability of its reproduction is still being observed, but if the supply recovers and downstream demand does not meet expectations, there will still be a certain upward pressure on steel prices.
In terms of specific operations, the current pumping phase of futures contracts provides a certain safety margin for base difference trading, and we can still continue to pay attention to the relevant opportunities of base difference trading. In addition, in terms of structural trading, we can also appropriately pay attention to the reverse hedging of the screw 10-01 contract. In addition, as iron and steel production recovers, steel mill profits may come under pressure again, and we may continue to focus on related opportunities to enhance empty steel mill profits.