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.
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. In May, fixed investment (excluding farmers) rose 5.87% month on month, up 0.9% year on year, the first time since July 2019.
Securities companies including YueKai securities and CSCI predicted that infrastructure investment and real estate market will continue to recover under the support of policies, especially infrastructure, with a high growth rate in the whole year. The pace of investment recovery in manufacturing industry is relatively weak, which has become the main drag of fixed asset investment. However, there are also many industries with outstanding performance, including automobile, construction machinery, etc.
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 initiated in China, and the steel industry immediately implemented a drastic policy of capacity reduction. Steel prices rebounded substantially 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.
At the same time, the domestic steel consumption demand is relatively strong: from the perspective of the domestic crude steel apparent consumption, the national crude steel apparent consumption from January to May this year is about 391 million tons, 3.3% higher than last years year-on-year growth; in May, 6.3% higher than last years year, and the consumption acceleration trend is relatively obvious.
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.
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.
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.
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.
The commodity price index of Xiben Shinkansen shows that the price index of black bulk commodities, including steel, iron ore and coke, has been rising since April. Among them, iron ore rose significantly.
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
According to Chen Kexins analysis, due to the counter cyclical adjustment effect of the decision-makers, the acceleration of infrastructure investment and real estate investment, and the return of industrial production to normal level, it is expected that domestic steel consumption will continue to rise, while domestic steel prices are still higher than the international market, so Chinas steel imports may increase in the future. It is estimated that the annual steel imports will exceed 13 million tons, an increase of more than 7% over the previous year.
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.
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%.
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 machinery and building materials industry of CSCI, previously analyzed that under the neutral assumption, the infrastructure investment from April to 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: Yang Qian, editor in charge of Economic Observer_ NF4425
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.
Lu Juan, chief analyst of machinery and building materials industry of CSCI, previously analyzed that under the neutral assumption, the infrastructure investment from April to 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.