Money Flow Analysis
DCE coking coal led the ferrous market rebound from last week and iron ore potentially caught up with its ferrous team-mate as well. However the rebound is exhausted since aggregated iron ore open interest is decreasing, indicating the strength has weakened. Moreover, SHFE Rebar and DCE coking coal start to correct by late this week.
Macro and Downstream
China utilised many financial tools to enhance liquidity in Q1 to neutralise the risk of wide-spread Coronavirus infections. However the impact of the financial packages are yet to be seen. Most of projects in mid-China and northern-China are still moving to March and April.
The resumption of projects mainly depend on containment of the virus, though currently both suspected patients and confirmed patients are decreasing. Related authorities also claim that a turning point for infections is not confirmed.
The major contradiction of the ferrous market is the shortage caused by transportation versus the incomplete resumption in the downstream sector.
Migrant workers are routinely being kept in two weeks’ quarantine. However many steel mills have already started early last week. That is to say, steel inventories will continue to climb next week. Steel production is also expected increase but the statistics are not included in surveys this week.