Behind the reversal of steel import and export: the rhythm of economic recovery at home and abroad

category:Finance
 Behind the reversal of steel import and export: the rhythm of economic recovery at home and abroad


According to the analysis of many industry researchers to the economic observer, behind the reversal of the growth pattern of steel import and export is the projection of the change of Chinas and overseas macroeconomic situation. In particular, since the outbreak, the differences in the recovery time and progress of domestic and foreign economies have made ferrous metals one of the most powerful commodity categories in the domestic market.

A number of steel traders and industry analysts from Shanghai told the economic observer that based on the counter cyclical adjustment effect of the decision-makers, infrastructure investment and real estate investment accelerated, industrial production returned to normal level, and market funds were relatively abundant. It is expected that domestic steel consumption will continue to heat up, and the steel market will maintain an optimistic situation in the second half of the year.

Behind the increase of import and decrease of export

Xu Xiangchun, chief information officer of iron and steel network, analyzed in the economic observer on June 18 that the sharp increase in steel imports this year reflected a phenomenon that Chinas steel industry has changed from a global price depression to a price highland, and the changing characteristics of export data are also consistent with this.

In 2015, Chinas steel exports reached an all-time high of 112.4 million tons. Since 2016, the supply side structural reform has been launched at home. The steel industry immediately implemented a drastic policy of capacity reduction. Steel prices rebounded sharply at the same time, and the price gap with foreign countries gradually narrowed. From 2016 to 2019, Chinas steel industrys exports dropped for four consecutive years.

Xu Xiangchun said: when the price gap between China and foreign countries narrowed to the second half of 2019, there was an increase in imports. At that time, we noticed a phenomenon that some foreign billets or hot-rolled coils often entered the Chinese market, because at that time, the domestic steel price was often higher than the international market. This situation is even more prominent this year. Due to the impact of the epidemic, the recovery of foreign economy is later than that of China. Chinas steel demand is much stronger than that of foreign countries. Compared with domestic market, the volume and price of foreign market are not ideal. Therefore, some products of Turkey, CIS, South Korea, Vietnam and other countries choose to export to China.

Looking for steel network researcher he Shaoling to analyze in the economic observation report on June 18, he thinks that the negative import data is positive because, on the international side, affected by the epidemic situation, the downstream enterprises demand for steel is reduced, which makes the demand drop more, the steel sales are not smooth, and the domestic sales of steel enterprises are transferred to export.

On the domestic side, the domestic steel price is relatively high compared with the foreign price, while the import price is relatively low, which makes the domestic import volume increase.

Taking hot coil as an example, he Shaoling said that on June 18, the export price of hot coil in China was 450-470 US dollars per ton of CFR, while that in India was 445 US dollars per ton of CFR, Japan was 460 US dollars per ton of CFR, Vietnam was 455-465 US dollars per ton of CIF (cost plus insurance and freight).

Statistics also show that in May, the output of steel consumption industry products, most of which showed a significant year-on-year growth. In May, the automobile output increased by 18.2% year-on-year, the excavator sales increased by 68%, and the new construction area of national real estate enterprises also changed from negative to positive, up 2.52% year-on-year.

According to Chen Kexin, an analyst at Lange Iron and steel network, it is precisely because of this that the apparent consumption of crude steel in the first five months of this year increased by 3.3% year-on-year, and further accelerated in May.

Looking for steel net is one of several e-commerce platforms with the largest steel trading volume in China. On June 18, the search for steel grid told the economic observer that during the outbreak, the trading volume of the search for steel grid platform increased rapidly. As early as March, the trading volume of the platform had recovered to the average level of last year. Taking pangmao logistics, a logistics platform under the company, as an example, the year-on-year growth of trading volume in April and may was about 30% and 60% respectively.

He Shaoling thinks that the increase of transportation capacity demand of steel logistics also reflects the gradual improvement of steel market demand.

Tight balance?

The data provided by qiugang.com also shows that, from June 11 to June 17, among the four categories of steel monitored by the platform, the stocks of building materials, hot coils, medium and thick plates and cold plating steel, except for the flat aspect ratio of medium and thick plates, the stocks of the other three categories decreased by 1.4% - 4.9% in the aspect ratio.

Does the continuous decline of social inventory mean that the current steel market is in a tight balance state?

According to he Shaolings analysis, from the stock data tracked by the steel grid, although the stock has declined for 14 consecutive weeks after the year, the speed of stock reduction in the past two weeks has slowed down; the inventory of construction steel works has accumulated for two consecutive weeks, and the decline of apparent consumption this week has narrowed.

From the perspective of current supply, the steel mills still have profits, which keeps the output at a relatively high level. In addition, the increase of domestic steel imports makes the domestic supply pressure relatively large.

From the perspective of demand, although the recent demand for plate products is acceptable, the order of steel mills has increased, and the factory price of steel mills has been increased in July, which also supports the price of construction steel. However, from the perspective of marginal change in demand, the short-term demand for plate products may be stronger, but the later period may be under the pressure of downward export. In addition, in terms of the supply of funds for this year, from the perspective of the two sessions and M2, the funds for this year will remain relatively sufficient, so as to provide more support for the inventory of intermediate traders, downstream construction sites and the construction of infrastructure industry, and enlarge the function of the reservoir in the market circulation link. He Shaoling said, therefore, I personally believe that the current market pressure is relatively still there, but the relatively loose capital side enlarges the function of the reservoir in the middle, making the market present a tight balance

Xu Xiangchun also believes that there is no tight balance in the current market. Although the inventory is declining month on month, the current inventory is still 30% higher than the same period last year, that is to say, the amount of steel produced this year is stacked in the warehouse, more than last year. In addition, the central bank has loose monetary policy and abundant funds this year. There may be a large amount of money entering the steel industry chain, so there may be speculative demand.

On June 18, the head of a steel trader from Shanghai told the Economic Observer: in terms of volume, our year-on-year growth is better this year. Due to the impact of the epidemic, part of the demand in February and March was delayed, and there was a rush to work in April and may, which also contributed to a part of the growth. Now June has entered the off-season, and the sales volume has dropped a little, but from the data, the year-on-year is still high.

The trader described the situation of the domestic steel market this year as high demand, high output and high price. He believes that this is due to the abundant investment and construction of downstream projects and the obvious effect of economic stimulus.

An indicator closely related to fixed asset investment also continued the trend of substantial growth. According to the statistics of China Construction Machinery Industry Association, in May, the sales volume of mining machinery products in the whole industry increased by 68% year-on-year, which also continued the trend that the sales volume in April increased by nearly 60% year-on-year.

Fixed investment to positive

Xu Xiangchun predicted that steel exports will fall 15% this year, while the growth rate of imported steel will reach 30% - 40%.

He Shaoling also analyzed to the economic observer that, due to the relatively sufficient market funds this year, the function of the intermediate link reservoir has been enlarged, and the iron and steel market has not shown a state of financial difficulties, which also makes the overall market mentality better.

On June 15, the National Bureau of statistics released data showing that from January to may, the national fixed asset investment (excluding farmers) was 19919.4 billion yuan, down 6.3% year-on-year, 4.0 percentage points lower than that from January to April. On a month on month basis, fixed asset investment (excluding farmers) increased by 5.87% in May. From a year-on-year perspective, the single month growth rate in May was 0.9%, the first time since July 2019.

Li Qilin, chief economist of YueKai securities, recently analyzed in the research report that, at present, real estate and infrastructure investment are the main support in the fixed investment, while manufacturing investment is still the main drag despite the rapid recovery.

Specifically, the cumulative growth rate of full caliber infrastructure investment rose from - 8.8% to - 3.3%, and the single month growth rate increased from 4.8% to 10.9%. Li Qilin believes that as the main driver of counter cyclical regulation, special bonds are inclined to the field of infrastructure construction, and major projects are launched everywhere. In May, the growth rate of infrastructure investment continued to pick up significantly. Considering the lag of the financial expenditure method, the actual infrastructure investment in May recovered more.

Real estate data continues to pick up. From January to may, the growth rate of commercial housing sales area increased from - 19.3% to - 12.3%. After the acceleration of resumption of work and production, real estate investment also continued to repair, with the cumulative growth rate rising from - 3.3% to - 0.3%, close to the same period last year, and the single month investment growth rate increased from 7.0% to 8.1%.

Mr. Li expects real estate to continue to be a terminal demand to support the economy this year. On the one hand, although there will be no overall deregulation, the probability of tightening is very small, and the direction of real estate sales continues to pick up. On the other hand, the monthly growth rate of new housing construction area in May turned positive from - 1.3% to 2.5%, which also shows that the expectation of developers is not bad.

In the first five months, the cumulative investment in manufacturing industry was - 14.8% year-on-year, the previous value was - 18.8%, and the single month growth rate slightly increased from - 6.7% to - 5.3%. It can be seen that the pace of investment recovery in manufacturing industry is obviously weaker than that in real estate and infrastructure construction, which is also the main drag of fixed asset investment. This reflects the fact that manufacturing enterprises are cautious about capital expenditure under the condition of not optimistic expectation, and Li expects this trend to continue. As a manufacturing industry strongly related to infrastructure construction and real estate, construction machinery continued to show strong production and sales in May, with excavator sales up 68% year-on-year. Li Qilin predicted that under the support of policies, infrastructure investment will continue to pick up, and the annual growth rate is expected to reach 6% - 8%. Lu Juan, chief analyst of CSCI machinery and building materials industry, previously analyzed that under the neutral assumption, infrastructure investment in April December is expected to increase by 10.5% compared with the same period last year. The CSCI real estate team predicted that the growth rate of real estate development and investment in 2020 would increase by 1.2% year on year. Source: editor in charge of Economic Observer: Yang Bin_ NF4368

In the first five months, the cumulative investment in manufacturing industry was - 14.8% year-on-year, the previous value was - 18.8%, and the single month growth rate slightly increased from - 6.7% to - 5.3%. It can be seen that the pace of investment recovery in manufacturing industry is obviously weaker than that in real estate and infrastructure construction, which is also the main drag of fixed asset investment. This reflects the fact that manufacturing enterprises are cautious about capital expenditure under the condition of not optimistic expectation, and Li expects this trend to continue.

As a manufacturing industry strongly related to infrastructure construction and real estate, construction machinery continued to show strong production and sales in May, with excavator sales up 68% year-on-year.

Li Qilin predicted that under the support of policies, infrastructure investment will continue to pick up, and the annual growth rate is expected to reach 6% - 8%.

Lu Juan, chief analyst of CSCI machinery and building materials industry, previously analyzed that under the neutral assumption, infrastructure investment in April December is expected to increase by 10.5% compared with the same period last year. The CSCI real estate team predicted that the growth rate of real estate development and investment in 2020 would increase by 1.2% year on year.