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The steel market in the second half of the year is expected to be better than th

Class:Industry dynamics       2019-06-26 16:08:34

Looking back at the steel market in the first half of this year, it can be concluded that the performance in the peak season is not as good as expected, and the performance in the off-season is not weak. Despite the influence of factors such as high output, high cost and the mismatch between supply and demand caused by intermittent production restriction policy, the overall trend of market prices is stable. Jinan Langteng International Trade Co., Ltd. Xiaobian analysis of the reasons for this situation are as follows:


First, steel production remains high and steel prices are under pressure for a long time. In the first three months of the first half of this year, steel production has been suppressed for a long time due to the restriction policy of heating season in various regions, especially in important steel-producing areas. With the lifting of the ban on production restrictions, the release rate of steel production has accelerated significantly since April.


According to the latest statistics of the National Bureau of Statistics, the pig iron output in May reached 72.19 million tons, an increase of 6.6%, crude steel output reached 89.09 million tons, an increase of 10%, and steel output reached 107.4 million tons, an increase of 11.5%. In the first five months, the cumulative production of pig iron reached 335.35 million tons, an increase of 8.9% over the previous year; the cumulative output of crude steel reached 404.88 million tons, an increase of 10.2% over the previous year; and the cumulative output of steel reached 480.36 million tons, an increase of 11.2% over the previous year. Although the June data are not yet published, the crude steel production and steel production in the steel industry in the first five months of this year are expected to increase steadily in June. For this reason, in the first half of this year, steel prices are under pressure, and it is difficult to keep rising.


Second, iron ore prices rebounded strongly and steel costs remained high. In the first half of this year, the steel market also declined and fell, but there was no large-scale collapse. This is undoubtedly the strong performance of iron ore prices in the first half of the year. In the first half of this year, Vale's expected sales fell by 34 million to 59 million tons due to factors such as Brazil's dam break and Australian hurricane. Although the increase and resumption of production of domestic and overseas small and medium-sized mines have made up part of the supply gap, it is still difficult to change the overall pattern of tight supply. Especially with the rapid growth of crude steel output in domestic steel mills in April, the demand for iron ore has increased considerably.


Driven by the recovery of demand, iron ore prices rose sharply in the first half of this year. As of June 19, 62% of China's imported iron ore grade prices had risen to $110.3 per ton, a 52% increase compared with the beginning of this year, a new high in the past five years. The price of 65% of Brazil's high-grade iron ore exports is currently around US$123.7 per ton, which also sets a new high in the past five years. It is under the strong support of cost factors that steel prices did not fall sharply in the first half of this year.


Third, the growth rate of fixed assets investment has slowed down, and the pulling role of "steel demand" is unstable. In the first half of this year, the release of terminal demand was generally less than expected. Taking the automobile industry as an example, according to the latest statistics of China Automobile Industry Association, in May this year, the national passenger car sales reached 1.561.2 million vehicles, down 0.87% annually and 17.37% year-on-year. Among them, compared with April, except for the growth of multi-functional passenger car sales, other varieties have declined; compared with the same period last year, the sales of four categories of passenger car varieties are showing a faster downward trend. Passenger car sales in the first five months of this year amounted to 8.3987 million vehicles, down 15.17% from the same period last year. Although the June data are not yet available, the expected decline in sales is a high probability event. The slump in the automotive industry has naturally reduced steel demand. This is also the first half of this year steel market appeared "long strong plate weak" situation is an important reason.


It is worth mentioning that sales of new energy vehicles are still growing. In May, the production and sales of new energy vehicles totaled 112,000 and 104,000 respectively, up 16.9% and 1.8% respectively. Among them, the production and sales of pure electric vehicles completed 94,000 and 83,000 respectively, up 21.7% and 1.4% year-on-year respectively; plug-in hybrid vehicles produced 18,000, down 4.2% year-on-year, sales of 21,000, up 2.2% year-on-year; fuel cell vehicles completed 316 and 315 respectively, up 104.3 and 8.0 times year-on-year respectively.


From the perspective of fixed assets investment, the latest data released by the National Bureau of Statistics show that in the first five months, the national fixed assets investment (excluding agriculture) reached 2175.55 billion yuan, an increase of 5.6% over the same period last year, and the growth rate fell by 0.5 percentage points compared with the first four months of this year. The slow growth of fixed assets investment naturally slows down the pull of "steel demand". It is also reasonable that steel market is difficult to rise for a long time in the first half of the year.


Based on the above reasons, the steel market in the first half of the year will have a support at the bottom of the price and limited room for growth. In my opinion, if there is no significant positive factor "airdrop", the steel market in the second half of the year is likely to repeat the first half of the market trend, the market highs are likely to appear in the third quarter, the market in the second half of the year is expected to be slightly better than the first half. The reasons are as follows:


On the one hand, the market demand resilience is still in place, especially with the landing of special local bonds, local government fixed assets investment will inevitably speed up, which is expected to release steel demand. In the second half of the year, the contradiction between supply and demand in the steel market is expected to be improved, which does not exclude the possibility that steel prices will rise further.


On the other hand, from the cost point of view, iron ore supply is expected to remain tight in the second half of the year. Although there is little room for continued rise in iron ore prices, price resilience remains strong. Therefore, the steel market cost is expected to remain stable in the second half of the year. In this case, in order to pass on the cost pressure, improving the ex-factory price of products is still one of the first choices of steel enterprises.