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In March, the decline in construction materials continued, but the rate of decline narrowed. Notably, prices for rebar in Central China saw a slight increase. High inventory levels, slow demand recovery, and financial pressures at the end of the quarter all contributed to ongoing constraints on steel prices. Merchant shipments remained dominant in the market. The number of steel mills undergoing maintenance increased during the month, and crude steel production stopped its fluctuating trend. Additionally, seasonal demand in the steel market began to pick up, with middlemen and end-users accelerating their purchasing pace. Social inventories decreased for five consecutive weeks, reducing sales pressure and adding some optimism to the market.
Economic data for the first quarter was not strong, which has led to heightened expectations for government stimulus policies in the second quarter. This has provided some support to steel prices. It is recommended that downstream steel companies purchase based on actual demand, while traders should replenish stock according to available resources and sell during price rallies. Wet storage operations remain the main strategy, and intermediate traders should focus on short-term trading cycles.
**Domestic Market Dynamics**
The domestic building materials market remained weak in March, although the decline was less severe than in February. Rebar prices in Central China saw a small increase. The slow start of downstream demand and the accumulation of social inventory from previous periods continued to constrain steel prices. As the quarter ended, financial pressures were higher than usual, and the credit crisis in the steel industry further intensified these pressures. Most businesses adopted a cautious approach, leading to a gradual decline in the overall market.
The number of steel mills undergoing maintenance increased, and crude steel production declined. With rising temperatures, terminal demand improved in the latter half of the month, gradually weakening the fundamentals. Some first-line resources emerged in certain markets. Additionally, unsatisfactory economic data for the first quarter raised market expectations for stronger government stimulus policies in the second quarter. As a result, market sentiment improved toward the end of the month, with some cities experiencing rising prices.
**Cost Analysis**
Profit margins showed a slight improvement in March. According to cost models, as of March 31, small and medium-sized steel enterprises producing 20mm three-tier rebar had a profit margin of -471 yuan per ton, an improvement of 12 yuan per ton compared to the end of last month (-483 yuan). For 6.5mm high-line steel, the profit margin was -355 yuan per ton, up by 34 yuan per ton from the previous month (-389 yuan). Since mid-December last year, steel prices have dropped sharply for three consecutive months, reaching historically low levels. There is limited room for further declines. With macroeconomic policy support increasing steadily, and traditional consumption season approaching, supply and demand dynamics may improve. In April, steel prices could see some rebound potential.
Regarding raw materials, demand is expected to gradually recover, reducing inventory pressure. In the short term, many steel mills and traders will need to restock, increasing turnover in the raw material market and strengthening performance. Overall, the Building Materials Research Group expects a modest improvement in the profitability of small and medium-sized steel enterprises this month.
**Total Inventory Changes**
The total inventory of domestic building materials fell sharply in March. As of February 28, total inventory was approximately 12.1085 million tons, a decrease of 8.49% compared to the previous month, and a year-on-year decrease of 12.52%. Thread inventory was about 9.5741 million tons, down 7.75% from last month, and a year-on-year decrease of 10.63%. Wire rod inventory was approximately 2.5344 million tons, down 11.19% from the previous month, and a year-on-year decrease of 19%.
According to the latest data from the China Steel Association, in mid-March, the country's crude steel output was 16.9172 million tons, with an average daily output of 1,691.7 thousand tons, an increase of 31,200 tons or 1.88% compared to the previous month. Although de-stocking was effective, crude steel production data was not very optimistic. With the start of demand, inventory is being further reduced. Overall, it is expected that inventory will continue to decline in March, though the pace may be slightly slower than in the same period last year.
**Import and Export Analysis**
(1) **Import Analysis**: In February 2014, steel rod imports continued to decline compared to the same period last year. Wire rod imports totaled 34,700 tons, up 57.38% year-on-year and 42.48% month-on-month. Rebar imports were approximately 0.26 million tons, down 4.8% year-on-year and 23.91% month-on-month. Total wire coil imports were around 37,000 tons, down 50.51% year-on-year and up 41.48% month-on-month. In March, the domestic building materials market remained weak, and the "golden March" did not materialize. Weak economic data and slow downstream demand, along with excess domestic steel supply, suppressed steel price increases. Due to insufficient domestic demand and low prices, steel mill imports were constrained. However, with a faster market recovery, import volumes are expected to rise slightly in March.
(2) **Export Analysis**: In February 2014, steel bar exports declined year-on-year, while wire rod exports both rose and increased month-on-month. Rebar exports were 6,200 tons, down 74.29% year-on-year and up 80% month-on-month. Wire rod exports reached 582,700 tons, up 18.77% and 867.22% respectively. Total wire screw exports were approximately 587,900 tons, up 14.43% and 824.86% compared to the previous month. In March, the international steel market operated steadily, with demand in Europe picking up. Steel mills raised prices, and market prices were expected to increase. In the U.S., demand improved significantly, and there was no preference for downstream purchases, leading to price increases. While China’s steel prices have clear advantages, Europe and the U.S. have seen growing demand, making export conditions favorable. However, anti-dumping investigations in the U.S. on Chinese wire rod products have compressed export volumes, so steel exports are unlikely to rise significantly. It is expected that exports will increase slightly in March.
**Downstream Demand Analysis**
(1) **Infrastructure Construction**: According to the latest data from the Ministry of Transport and the Bureau of Statistics, fixed asset investment in transportation in February increased by -1.51% year-on-year, but rose 19.24% compared to the same period last year. Highway, inland waterway, and coastal construction investments increased by 30.29%, -24.57%, and -54.52%, respectively. Urban fixed asset investment grew by 17.9% year-on-year, and total construction project investment increased by 16.8%. New project planned investment rose by 14.7%, and investment funds increased by 14.6%. Although the growth rate of investment and capital in place slowed compared to the same period last year, new project investment growth accelerated. Highway investment growth was particularly strong. This year, the state will strengthen infrastructure construction, including railways, highways, and rural water and road networks, and increase farmland irrigation efforts. It is expected that water conservancy, highway, and railway construction will accelerate in the short term, leading to a rebound in the demand for infrastructure steel such as rebar and pipes. However, the recovery remains weak.
(2) **Real Estate**: According to statistics from the National Bureau of Statistics, real estate development investment in January-February 2014 reached 795.6 billion yuan, a nominal increase of 19.3% year-on-year, with a growth rate 0.5 percentage points lower than the previous year. The area of housing under construction by real estate developers was 529,593 square meters, up 16.3% year-on-year, with a growth rate 0.2 percentage points higher than the previous year. New housing starts decreased by 27.4%, and completed housing area decreased by 8.2%. Land purchase area by real estate developers was 40.62 million square meters, up 6.5% year-on-year, and land transaction prices reached 100 billion yuan, up 8.9%. Commercial housing sales area decreased by 0.1% year-on-year. The first two months of the real estate market were characterized by mixed performance. Declining commercial housing sales and tight funding affected housing company enthusiasm, resulting in a significant year-on-year drop in new housing starts. However, under tighter controls and expected weakening housing prices, housing companies have accelerated construction, and construction conditions remained stable. Urbanization and other potentials became more visible, driving strong demand in hot-spot cities and fueling a competitive land market. Currently, property control measures are being implemented, with "two-way control" and classification guidance. Housing protection and slum redevelopment have become key strategies. Control in first-tier hot-spot cities remains difficult to relax. In March, overall property transactions continued to decline, and housing enterprise capital was not optimistic. In the coming period, housing prices are expected to weaken, and commercial housing demand may decrease. However, some housing companies will accelerate promotions. It is expected that the real estate market will continue to recover from seasonal weakness in the short term, and related building material demand will slowly pick up.
**Steel Price Adjustment Analysis**
In March, steel mill policies were adjusted downward. Under the macro-environment of sharp price declines in steel and related commodities, and the lack of benefits for all parties, market prices continued to fall. Steel mill prices dropped, and the amplitude of price changes varied across different types of steel. Considering that most current social inventories remain high and demand is difficult to improve in the short term, it is expected that steel mill policies will strengthen in the coming month.
**Market Analysis**
**Technical Analysis**: As of March 31, the main screw contract 1410 opened at 3413, with a monthly high of 3438, a low of 3141, and a closing price of 3328. The closing price fell 84 points from the previous month, a decrease of 2.46%. The total volume was 48,184,696 contracts, with 1,885,346 lots at the end of the month.
From a technical perspective, the May contract 10-month moving average line formed a death cross. From the K-line view, the weekly K-line oscillated at a low level, stabilized, and recovered, with the KDJ indicator running low. The MACD indicator was operating in a Hongzhu interval. From the Japanese K-line perspective, the K-line rebounded from a low level, with the KDJ indicator diverging upward and the MACD Hongzhu expanding.
**Outlook for Next Month**: It is expected that the 1410 contract will consolidate narrowly in the early part of the month, ranging between 3320-3370, with a slight correction in the later period. Bulls should participate properly in the early stage and wait and see. Long and short positions should be controlled within 10%, and daily futures operation recommendations are specified accordingly.
**Trend Prediction for Next Month**: Based on the impact of building materials market trends, the next month's long and short odds are balanced. Real estate financing is more difficult, and even if seasonal demand recovers, its release intensity can only make businesses cautiously optimistic. Mid-March steel mill inventory continued to rise, forcing factory price adjustments to be narrow, with limited impact on the market. Raw material prices are expected to be weak, with poor cost support. However, sluggish first-quarter economic data may prompt macro-level steady growth policies to accelerate, boosting Zhengang City demand and business confidence. Building materials and social inventories have fallen for five consecutive weeks, with current levels lower than previous years, reducing sales pressure. Therefore, the building materials research group expects a limited rebound in the market next month.