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Will the steel market succeed in the second half of 2009?

Class:Industry dynamics       2019-06-28 11:22:05

Market Review


At the end of the second quarter, the steel price index was 4110 yuan/ton, down 3.29% year on year. Since March, the market price has turned negative again year on year, indicating that the relationship between supply and demand has weakened again. This is also the result of the continuing weakening of the structural reform on the supply side since the peak in the fourth quarter of last year. Among them, the introduction of new capacity has become the core suppressing factor. In terms of inventory, the total social inventory at the end of the second quarter was 11.22 million tons, which was lower than the market scale of 9.39 million tons in the same period last year, an increase of 9.44% over the same period last year. Market inventory began to grow and the relationship between supply and demand weakened. Buy steel for professional Jinan Langteng International Trade Co., Ltd.


Crude steel production and steel plant inventory scale are in high range. From the daily average crude steel output caliber of key enterprises, the average daily crude steel output in the second quarter exceeded 2 million tons, higher than the average of 1947 million tons in the same period last year, and higher than the average of 188 million tons in the last quarter. The crude steel output reached a new high. The total inventory of steel mills as of mid-May was 12.68 million tons, slightly lower than 13.91 million tons in the same period last year, indicating that the pressure of weak supply and demand in the market can be controlled.


The industry's environmental protection policy has been adjusted, the blast furnace start-up rate has been increased, and the profit of steel mills has been weakened. In terms of production, the average start-up rate of blast furnace in the second quarter was 69.85%, higher than 69.5% in the same period of last year, and higher than 66.79% in the first half. In terms of profit, the average profit surface value of steel mills in the second quarter was 81.03%, lower than 84.66% in the same period of last year, indicating that the industry's profit was somewhat weakened.


From the point of view of short-process steelmaking, the profit also reflects the weakening trend. The average profit per ton of EAF steel in the second quarter is 301 yuan/ton, which is much higher than that in the first quarter when the average profit is less than 50 yuan/ton, but still slightly lower than 362 yuan/ton in the same period last year.


Improving the power of steel exports is insufficient, which makes it difficult to ease supply pressure. In May, steel exports totaled 5.743 million tons, down 16.53% from the same period last year, which was lower than the cumulative growth of 2.5% in the first five months. In the first five months, steel exports totaled 29.9 million tons, up from 28.49 million tons in the same period last year, indicating that the overseas market is difficult to share the pressure of domestic supply.


Fixed assets investment in iron and steel industry is high and output is released rapidly, and production capacity is put into operation. Fixed assets investment in iron and steel industry is at a high level. Data show that the total investment in fixed assets in the first four months is 43.3% year-on-year, which is higher than 2.7% last month and 5.3% in the same period last year. At the same time, the output has been put into production rapidly. This is the capacity investment we have continuously emphasized since our third quarter report last year. The pressure of capital acceleration and capacity release on the market is also a test of the viewpoint of starting a new capacity cycle in our industry. In the first five months, the cumulative growth rates of crude steel production and pig iron production were 10.2% and 8.9% respectively, which were significantly higher than those of the same period last year of 5.4% and -0.6%, indicating that the production was in the process of accelerating its release. In addition, since this year, pig iron production has increased substantially, and the gap with the growth rate of crude steel has been narrowed significantly, indicating that investment in production capacity this year is more inclined to long-process steel plants, while investment in short-process steel production capacity may slow down to some extent.


Prospect of finished product market in the second half of the year


Supply side: The capacity investment brought by capacity investment has been rapidly opened, and the pressure on the supply side has increased. In the quarterly report, we pointed out that the cumulative growth of crude steel production in 2019 will remain above the average of 9%, while the actual production growth rate in the first five months will be 10.2%, which confirms our supply growth forecast. From the above analysis, we can see that the growth of crude steel production will be further accelerated with a 43.3% growth rate of capacity investment, and the potential output of the whole year. The growth rate is expected to be no less than 11% and the supply will grow faster. However, this fast-growing investment in production capacity also has a weak impact on measures such as environmental protection and production restriction, which indicates that the investment in production capacity has raised the environmental protection level of steel mills to a level that meets the low emission standard. Thus, in the past three years, such measures as environmental protection and production restriction, which have a significant impact on supply, have been taken. Measures, the effectiveness of current iron and steel production activities has been very weak, supporting the rapid release of production, so in the second half of the year, the speed of capacity delivery is the core of our concern.


Demand: Influenced by domestic deleveraging, fixed asset investment continues to weaken. Fixed asset investment supported by real estate investment will also decline in the first half of the year. Capital investment will hedge the downward pressure of the economy by a large margin. At present, it is still controlled by the government. Generally speaking, the decline of demand-side growth rate is determined in the second half of the year, and the rhythm is still the core of our investment control.


Data show that in the first five months, the cumulative growth rate of fixed assets investment was 5.6% year-on-year, slightly higher than the 5.5% starting point of the de-leveraging policy adjustment in July last year, while in structure, real estate investment supported the investment in the first half of the year. The cumulative growth rate of real estate investment in the first five months was 11.2%, which was in a high range, but the growth rate fell 0.3% compared with the previous month. In terms of infrastructure investment, although some special debt can be applied to capital, leverage financing again, and support infrastructure investment, under the background that the government still emphasizes the control of invisible debt, the recovery of infrastructure investment is limited, and it is expected that in the second half of the year. The growth rate of infrastructure investment has risen back to 5%-7%. Generally speaking, the demand side shows a downward trend in the second half of the year, and the demand pressure in the off-season will be the greatest.


From the credit data, the stock of social financing increased by 10.59% year-on-year, lower than 11.59% in the same period last year, and slightly lower than 0.19% last month. This shows that the demand for financing in the market is still low and the demand for financing in the real economy is not good, which increases the situation of demand depression in the second half of the year. Money supply also shows the same trend, the top five.