Due to the continuous rise of the spot steel market in the last week, downstream users also maintain a wait-and-see attitude, with most of them buying mainly on demand. By convention, the months of July and August are the periods when the steel market actively reduces stocks. The main factor is the shutdown of steel mills for maintenance. From July this year, the continued decline in steel inventories is also expected.

Some steel traders reported that, since mid-July, construction steel resources in the steel market have been relatively scarce, and many steel mills have basically shut down their direct supply at noon, which has indirectly led to a slight rise in the current steel price above 4,000 yuan/tonne. Whether this situation can be sustained depends on steel market demand.

We believe that the major focus of steel demand in the second half of the year is not the growth of infrastructure steel, nor the country's upcoming policy to reduce steel production capacity, but the increase in steel market demand triggered by the "building delivery guarantee" policy to promote the resumption of construction work. The good news in these three areas is slowly fermenting, which is also the driving force behind the recent rebound in steel prices.

1. The policy of "guaranteeing building delivery" in several places has been accelerated, and increased demand for steel is imminent.

The high-level meeting emphasised the need to stabilise the national property market, and proposed consolidating the responsibilities of local governments to ensure building delivery, people's livelihoods and stability. Guaranteed delivery is an impetus to solve the current difficult situation of the real estate industry, and is of great importance to stabilise the real estate market and restore confidence.

Since the second half of last year, most property developers have been facing enormous financial pressure, which has resulted in many properties not being delivered on time, bringing problems for homebuyers. Most importantly, potential homebuyers have lost confidence in property developers, and the property market enters a vicious circle: consumers wait and see - the house cannot be sold - the developer has no money - the property cannot be delivered.

Recently, with the joint efforts of local governments, financial institutions and real estate companies, several funds have been accelerated to support real estate developers. On the evening of 29 July, Evergrande Group announced on its official website that, so far, there are 732 construction projects in the country, 579 projects have resumed work and reached normal construction, and 126 projects are in the process of resuming construction; on 4 August, Kaisa Group announced that it will fully resume work on the suspended buildings and strive to deliver the buildings on time.

In the Evergrande Group alone, 732 construction projects have resumed construction. The number of buildings guaranteed to be delivered nationwide must be huge. With the large number of resumption of construction projects, the demand for construction steel in the second half of the year will continue to increase for a long time, which will also be a strong support for the trend of steel prices after August.

2. The National Development and Reform Commission calls for taking advantage of the peak construction season in the third quarter and accelerating the construction of large projects.

The National Development and Reform Commission held the first meeting of the coordination mechanism to promote effective investment in major projects. The meeting noted that my country's economy is in a critical window of stabilisation and recovery, and the third quarter is crucial. Actively expanding effective investment is an important support to stabilise the economy. Accelerating the construction of major projects is an important deployment that benefits both the present and the long term.

The latest construction activity index for July released by the National Bureau of Statistics was 59.2%, up 2.6 percentage points from June. Domestic construction output activity has accelerated, indicating that construction of infrastructure projects is picking up, and demand in the steel market has picked up.

3. The steel capacity reduction policy is about to be implemented, and the supply reduction will support steel prices.

A few days ago, He Wenbo, executive chairman of the China Iron and Steel Association, said In the second half of the year, all steel enterprises should insist on organising production according to actual needs.

In the first half of the year, the National Development and Reform Commission has taken measures. Domestic steel production capacity this year cannot be higher than last year. According to some market analysts, this year's steel production capacity is expected to be reduced by about 30 million tonnes. The downward trend in steel prices since the beginning of the month.

To sum up, last week, some coke enterprises proposed to raise the coke mill price by 200 yuan/tonne in the first round, which was resisted by large steel mills in the north and could not be implemented. Taking advantage of this week's Ganqimao epidemic, Mongolian coking coal cannot be imported normally, and coke production enterprises will definitely increase again, and the probability of price increase is expected to be high.

Then, with the continuous injection of various funds into the real estate enterprises, the pace of resumption of work and production in the real estate sector will be further accelerated, which will also bring a big increase in the "Golden September Silver October" steel market.