Analysis of Development Trend of Steel Market in 2013

With the stabilization of the main economic indicators, the worst period of the Chinese steel market has passed, and the modest rise in 2013 will be noted. The domestic demand is obviously stronger than the external demand, and the currency factor has become an important promoter of price rise. Due to uncertain factors such as the debt crisis in Europe and the United States, its recovery process is difficult to smooth.

First, the worst period of market demand has already passed. In 2012, some economic indicators showing the intensity of steel consumption, fixed asset investment, and the growth rate of industrial production have shrunk, and China's steel demand has been weak. In order to prevent a "hard landing" of economic growth, relevant departments have issued measures to stimulate domestic demand, especially speeding up the approval of various types of investment. Since the beginning of September, the total investment of the National Development and Reform Commission approved more than 5 trillion yuan. In October, the country’s railway infrastructure investment reached 69.8 billion yuan, a year-on-year increase of 2.4 times. It is expected that the railway infrastructure investment in 2013 is expected to exceed 500 billion yuan, much higher than this year's level.

Affected by this, in the fourth quarter, China's economy, including steel demand, has bottomed out and stabilized. In October, China’s purchasing managers’ index (PMI was 50.2, which rose for two consecutive months and stood above the line of Rong and Jue; in September and October, the comprehensiveness of investment in fixed assets, industrial production, and trade exports continued to rise. Meanwhile, steel Prices and production also showed a sequential rebound, and these signs indicate that the worst period of China's steel demand has passed, and it is expected that with the gradual effect of the country’s policy of expanding demand, China’s steel demand will increase moderately in 2013, and the entire year’s crude steel consumption (including exports The same is expected to reach 750 million tons, an increase of more than 5%, more than this year's level.

Capital construction investment, as well as the production of investment products and equipment derived therefrom, are the main source of the increase in demand for steel products. Due to the approved investment projects, most of them belong to transportation projects, especially urban rail transit and high-speed railway projects. The intensity of steel consumption is high, and the required mechanical equipment usage and material flow are greater, thus building a solid foundation for steel demand. . From the perspective of varieties, construction steel demand, steel demand for railways, steel demand for machinery, steel demand for vehicles, demand for special steel, etc., should become the major increase in demand for steel products. From a time point of view, most of the investment projects were approved during the period from June to August. According to the lag period of 6 months, the actual steel demand of the above projects (from the beginning of the preparation of materials will be gradually reflected before and after the spring of 2013.

In the new year, due to factors such as the European crisis, the US fiscal cliff, and disputes over China-Japan relations, the external demand environment was severe, which led to the growth of China's steel consumption, which was mainly driven by domestic demand and showed a pattern of external weak and internal strong. It is estimated that the steel export volume will be around 55 million tons throughout the year, and the growth rate will obviously drop from the previous year, and may even decline. Indirect exports of steel, exports of automobiles, ships, machinery and equipment, household appliances and other products will be even worse.

Second, the domestic production of corresponding speed In 2012, China's domestic steel demand was weak, becoming the market's supply exceeds demand "the chief culprit", thereby seriously inhibiting the release of domestic production capacity. From January to October, the country’s crude steel production increased by only 2.1% year-on-year. It is estimated that the annual growth rate of crude steel production is about 3%, which is significantly lower than the average growth rate of about 10% in recent years.

The recovery of steel demand in the new year will inevitably lead to a corresponding increase in domestic production. It is estimated that the annual crude steel output will reach or exceed 750 million tons, an increase of more than 4%, which is higher than the 2012 growth level. Also due to demand, production of steel products such as railways and plate products is expected to end at a declining rate in the new year, and output of steel bars, wire rods, and steel pipes will continue to grow at a relatively large rate, and output increases such as hot-rolled steel sheet will decline.

The acceleration of national crude steel production, the relatively low level of iron ore, and the shrinkage of domestic mine production will inevitably increase the demand for imported iron ore. It is expected that the annual iron ore import volume is expected to reach or reach 800 million tons, an increase of more than 5%.

Third, multiple factors together to build a price increase base In 2012, China's weak steel demand is the main factor in the lower price shocks. With the stabilization of various economic indicators, the demand for steel in the new year has gradually increased, and the relationship between supply and demand tends to improve, and this has become a solid foundation for price recovery.

In 2012, the prices of raw materials such as iron ore and coke fell sharply, with the largest drop of more than 30%. Their cost support has weakened significantly, which is also an important reason for the decline in steel prices. After September 2012, the prices of smelting raw materials such as iron ore and coke oversold and rebounded, and the CIF of imported ore reached 30%. It is expected that the market outlook will remain relatively high, which will make the cost of steel prices rise at the bottom of the future. high.

This year, the steel trader's willingness to "winter storage" does not seem to be strong. If this is true. It is true that there is not a large number of “winter storage” situations that are universal and will inevitably inhibit the release of steel production by steel companies in the winter, which will be beneficial to the balance of supply and demand after the spring of the new year.

More importantly, after the second half of 2012, developed countries such as the United States, Europe and Japan have successively implemented “extremely unlimited” ultra-loose monetary policies, resulting in a proliferation of liquidity, especially the Fed’s de facto weaker US dollar policy. Push up the prices of bulk commodities such as steel, iron ore and coking coal in the international market.

In particular, it is necessary to draw attention that although the Fed’s “QE3” does not make much sense for the U.S. economic recovery, due to the existence of huge interest spreads at home and abroad and the low domestic asset prices, it can trigger “mass money” to enter China again. Directly and indirectly push up Chinese commodity prices and asset prices. For some time, the exchange rate of the *** exchange rate has continued to rise, and even a number of daily limit adjustments have begun to show this sign. Although the appreciation of *** will also reduce import costs to a certain extent, it is difficult to fully offset the upward driving effect of the “hot money” influx on the price of steel and related products.

The combined effect of the above factors will lead to a gradual upward trend in China's steel prices in 2013. The price level of steel products is higher than this year, and the increase in construction steel prices is higher than that of production steel. If there is no second recession in the world economy, the rebar price of the Shanghai Rebar ** contract will hit 3,800 yuan and 4,000 yuan. The price of iron ore, especially imported high-grade iron ore, will continue to rebound. In the first quarter of 2013, the price of its CIF will reach or exceed US$130, and the average annual price will be above US$120.

Although the Chinese steel market rebounded in the new year, it was affected by many uncertainties at home and abroad. The recovery process was difficult to follow, accompanied by relatively large shock adjustments.

Judging from the domestic factors, it is mainly the existence of huge production capacity and the vicious competition among enterprises. Once prices have risen to a lucrative position, steel companies are bound to compete to expand production, disrupt the balance of supply and demand, and keep the prices below the costlines of most companies, causing serious losses again.

From the external factors, one is that this is mainly due to the fact that the debt crisis in Europe has continued to deteriorate and remains tangled in the troubles of breach of contract, assistance, assessment, and tightening. The warning of the world’s second recession has not yet been lifted; "Budget crisis". If this problem is not solved properly, the U.S. economy will fall into recession. Third, the island dispute between China and Japan will be difficult to resolve within a short period of time. It is very likely that it will evolve into a long-lasting economic war and slow down the economic growth of both sides. To this end, the United Nations and other world economic organizations have issued warnings that the risk of a secondary recession in the global economy still exists, and even rises significantly.

It is the existence and fermentation of the above-mentioned uncertainties that make the price rise of raw materials such as steel and ore within the new year full of variables, and adjustments will occur at any time. But even so, the worst of the Chinese steel market has passed. In any case, the market will not return to the lowest price this year, and the overall upward trend will not change.