Since the beginning of this year, domestic macro-control policies have been gradually implemented, and large-scale credit growth, along with the strong impulse of local governments to promote economic growth and investment, is widely expected by the industry to continue to promote the growth of fixed-asset investment in the coming months. The probability of a “divergence†mutation in steel prices is small. But recently, there are new signs that steel prices may be in a sluggish state for a long period of time.
"New Surplus": "Over-and-not-left" will end
In recent years, the iron and steel industry has been a key industry in which government departments regulate and control "overcapacity." However, there has been a debate over the extent to which the steel production capacity has become excessive. From the 200 million tons of steel production, until the recent national multiple ministries jointly issued the "on suppression of excess capacity in some industries and repeated construction to guide the healthy development of industrial development," clearly put forward 700 million tons, this disagreement has always existed. The viewpoint of persisting in overcapacity is mostly demonstrated by the difference between apparent consumption and production capacity, while the view of denying overcapacity is that the steel production of steel mills has been digested every year. Domestically, it is “overdone but not left overâ€.
To this day, this view of denying overcapacity may be difficult to continue. First of all, since domestic steel products were converted from net imports to net exports in 2005, with the increase in domestic consumption and output, stocks of all types of steel products have generally increased. However, the increase in inventories exceeds the increase in consumption, which was even more pronounced in 2009. Taking the average monthly inventory data of hot rolled varieties in major markets across the country as an example, it was 1.37 million tons in 2006, 1.51 million tons in 2007, and 1.84 million tons in 2008, and the average inventory in the first nine months of 2009 reached 2.63 million tons. The year-on-year increase was nearly 800,000 tons, with a growth rate of 43%. Second, the seasonal characteristics of inventory gradually weakened, under normal circumstances, steel social inventory will change with the domestic climate, start conditions and other characteristics of demand, but in recent years, statistics show that domestic steel stocks, especially the plate has continued to "stabilize" and “Higher†trend, especially since September 2009, the social warehouse has not only accumulated a large amount of wire rods and sheet metal products, but also the steel mills have a large number of self-owned stocks. In the past, “looking for hardships†evolved to “find difficulties in finding librariesâ€. The sights of the “winter reservoir†appearing in the north can be seen everywhere in the south. The average daily production level in September is close to 1.7 million tons. It is estimated that steel output this year may exceed 560 million tons. According to incomplete statistics, the total inventory of steel and society has reached 50 million tons.
The reasons for this year's high inventory of steel products can be attributed to the sharp decline in direct and indirect exports of steel products. On the other hand, we must also see that the domestic "amount of days" of credit funds can insulate the infrastructure of railways, highways, airports, etc. Domestic demand in this and next two years may have reached its peak. If we consider the continued release of domestic and overseas new production capacity, it can be said that the subsequent increase in demand has caused the rapid growth of production capacity, and the era of “over and over†will end.
"New price": Causes for skyrocketing plunging
Since the beginning of this year, domestic steel prices have emerged a positive “V†shape and an inverted “V†shape. Although steel prices have also skyrocketed and plummeted in previous years, this year's situation has several “new†features that cannot be ignored.
First, the off-season is not faded and the busy season is not prosperous. Taking the Shanghai market as an example, the prices of ф16mm to ф25mm II rebar prices fell from the high of 3780 yuan/ton in February to 3100 yuan/ton in April, and then climbed all the way, after rising for 15 consecutive weeks, on July 24th. The day reached 3,940 yuan / ton, exceeding the peak of the beginning of the year. Since then prices began to gradually fall, as of October 12 prices fell to 3330 yuan / ton, compared to July 24 fell again 610 yuan / ton. This trend did not appear in the traditional off-season in the past summer, nor did it appear in the “golden nine silver ten†season in previous years.
The second is the return of futures prices from "irrational" to "rational." This year, steel prices were linked to financial capital for the first time, and steel futures immediately led to an “irrational†price surge after the warm-up, which had risen more than 12% in just 2 weeks and again in the next 3 weeks. It fell by 19%, and the degree of sudden rise and fall was rare. Even more analysts predict that steel futures will soar and fluctuate for a long time, and the market will play between the entity and the virtual. However, financial capital must be based on the fundamentals of madness. After the short-term consolidation in mid-September, the price of steel futures fell again in late September, returning to the spot price and rational direction.
In recent years, the history of steel prices has gone up and down several times. The skyrocketing plunge in 2005 can be attributed to the change in the domestic market for steel products from net imports to net exports; the price rise and fall in 2008 can be attributed to the impact of the international financial crisis, the steel industry It is difficult to be alone. The first few storms all rebounded, and short-term “reductions†by steel companies or traders “stocking†are the traditional countermeasures, waiting for a new round of price increases. In 2009, the panic caused by the crisis gradually eliminated, the crisis became a normal state, the market has a lot of common sense, whether the traditional experience of production companies and traders is still effective, it will be a big question mark.
"New competition": The steel industry will continue to have low profits
The international financial crisis has promoted drastic changes in the market and has also triggered changes in the domestic steel market structure. From a variety point of view, the situation of long products is better than that of flat products, and the decline of wire rods and rebars is significantly smaller than that of other steel products. Long product price trends have even played a significant role in driving flat products. From a regional perspective, the Asian region is obviously better than other regions, and China is obviously better than other countries in the world.
Under the influence of various factors such as policies and markets, the competition situation of steel companies has also changed. First, there is a variety of disputes. Small steel enterprises, mainly long products, have continued to make profits this year, and the operating rate has risen sharply. Large and medium-sized steel companies, mainly flat products, have only changed slightly in the second half of the year; the second is cost disputes. Iron and steel companies that focus on spot mines have an advantage in cost. Iron and steel companies that rely on long-term mines have had to endure the difficult course of “destockingâ€. Third, disputes over responsibility, state-owned large and medium-sized steel companies have assumed The important task of “keeping stability, ensuring development, and ensuring people’s livelihood†has not been reduced, and some iron and steel enterprises with flexible systems have been able to switch freely, and costs can be effectively controlled. In the long-term recovery of the global economy, steel companies will undoubtedly be involved in protracted competition. The domestic steel industry will exhibit more unique competition relationships with different scales, different ownership systems, and different varieties, and be able to timely adjust the structure and products. Steel companies that adapt to the market will become the winners of the market, and this kind of competitive relationship will undoubtedly lead the steel industry to remain in a low-profit situation.
At present, as China's economic growth continues to rise, the demand for steel in the downstream industrial sector is expected to continue to rise. Steel exports are expected to rebound to a certain degree with the recovery of the international economic situation. However, under the circumstance that the domestic steel industry investment regulation policy is difficult to implement and the industry governance will hardly receive fundamental results in the short term, the conditions of “new surplusâ€, “new price†and “new competition†will exist for a long time, especially overcapacity and inventory. Excessively high these two "shadows" shrouding the iron and steel industry will persist for a long time. In a fairly long period, steel prices will hardly rise sharply, and the rebound of the phased rebound will most likely become a "flash in the pan." Continuous, frequent price fluctuations around the average production cost will become the main tone of the steel market.