We had predicted that the domestic steel price would fall below 4,000 yuan per ton, but from the actual market performance, the steel price has indeed dropped continuously since July. By July 12, the domestic main rebar futures price had fallen below 4,000 yuan per ton, and before the end of July, the main rebar futures price remained below 4,000 yuan, which was basically consistent with our previous forecast. However, after entering August, steel prices began to rise slightly. In August, the main domestic rebar futures price 1 closed at 4,093 yuan per ton, once again exceeding the 4,000 yuan mark. Moreover, judging from the recent steel price trend, since July 18, steel prices have risen more and fallen less. In the past ten trading days, the steel price has risen from the lowest of about 3,700 yuan to the current 4,090 yuan, which is equivalent to an increase of more than 10% in about half a month. This is really a bit unexpected.

According to the previous market analysis, we predicted that the steel price may remain below 4,000 yuan before September, but we didn't expect the steel price to rebound from August. Since July, there are many factors supporting the decline of steel prices. On the one hand, the international iron ore price has been falling since June in the context of the continuous sharp interest rate hike by the Federal Reserve. Take Platts 62 as an example. Platts 62 fell all the way after reaching the peak of 147.25 USD on June 6, and fell directly to 96.65 USD in mid-July, with a drop of more than 34%, which is also the main reason for the direct drop of steel price.

On the other hand, after entering June, many places in China have ushered in the rainy season. There is relatively more rain in many places this year, which will have a great impact on some outdoor construction projects, especially the demand for steel in some large-scale projects such as bridges has slowed down significantly. The other is coking coal used in steel production. In the past, the price has also dropped sharply, further reducing the production cost of steel. In this context, domestic steel prices have also continued to fall.

However, after entering the middle of July, it can be said that the market changed suddenly. From July 18, iron ore suddenly began to rise, especially after July 2 1, iron ore showed a wave of rapid rise. By July 28th, iron ore rose by 1 17.95 USD, which was the same as that of July 65438+. Then why did iron ore suddenly rise so fast during this period? This can rule out the market demand first, because the demand for iron ore at home and abroad is relatively low recently, especially in the context of the Fed's interest rate hike, iron ore has no upward momentum.

According to the analysis of the current market, the main reason for this round of iron ore rise is that some overseas investors bought a large number of options to push up iron ore. According to institutional analysis, since mid-July, a giant has used OTC options and leverage to do multi-iron ore swaps in Singapore. As for who this giant is, the market can't determine his identity for the time being, but it is an indisputable fact that iron ore will surge in the short term because of the spoiler of this overseas giant.

Judging from the current trend of Singapore Iron Ore Exchange, from mid-July, a giant began to buy a large number of OTC call options for SGX iron ore swaps, while the seller's market makers were forced to carry out a large number of iron ore swaps to hedge their risk exposure, thus achieving Delta neutrality. Market makers passively do multi-swaps to push up commodity prices, and the market's estimated position exceeds1100,000 tons, which directly leads to a sharp rise in iron ore futures in Singapore, which has risen from about $96 to $65,400 at the peak in just half a month. After the price of iron ore futures in Singapore rose, domestic steel prices were also greatly affected.

During this period, steel prices suddenly rebounded and rose, which was really a bit unexpected. According to the current supply and demand situation of steel market, steel prices do not have the motivation to rise. Because iron ore rose sharply, the profit margin of steel mills was further compressed. After the iron ore fell some time ago, the billet profit rate of many steel mills has recovered to about 60~80 yuan per ton. However, with the continuous rise of iron ore, the profits of steel mills will be further compressed, thus weakening their enthusiasm for returning to work and increasing production, and the demand for iron ore in the corresponding market will also slow down. In addition, in the context of the continuous sharp interest rate hike by the Federal Reserve, global liquidity is further tightened, which is also bad for commodities.

So in the short term, at least in the next month, iron ore will not rise too much, and the corresponding domestic steel price will not rise too much, and it should fluctuate between 3800 yuan and 4500 yuan. But in the long run, after entering September, China's infrastructure will usher in the peak season, and the market demand for steel will further increase. In addition, real estate has improved significantly recently, and the market demand for steel will further increase. Therefore, in the long run, steel prices do have an upward momentum. In the fourth quarter of 2022, it is not excluded that the steel price may have been above 4,000 yuan, and may even reach more than 4,500 yuan.