Wu wenzhang to the economic observer analysis, "supply and demand mismatch" is the main reason for the rise in steel prices this winter: winter is the low season for steel demand, but this winter's demand is strong, and the inventory is low, resulting in the supply and demand mismatch.

On Oct. 24, the steel price index of nishimoto Shinkansen was 3,940, but by Nov. 21, it had risen to 4,390. The rapid rally in just over 20 days took the market by surprise after it was not optimistic about the winter steel market. Wu wenzhang to the economic observer analysis, "supply and demand mismatch" is the main reason for the rise in steel prices this winter: winter is the low season for steel demand, but this winter's demand is strong, and the inventory is low, resulting in the supply and demand mismatch.

With just over a month to go until the end of 2019, a rebound in steel prices in the winter is likely to bring the industry to another successful close. According to the national bureau of statistics, the main business revenue of China's steel industry in the first three quarters of this year was 5.33 trillion yuan, up 8.5% year on year, despite the decline in profits of large steel enterprises. Profits reached 470.4 billion yuan, up 39.3% year on year.

According to the statistical data, China's total crude steel demand in the first 10 months of this year is about 840 million tons, with a year-on-year growth of about 8%. It is estimated that China's total crude steel demand will approach or reach 1 billion tons in the whole year. In the first nine months of 2019, Asia was the main region of global steel growth, with China as the core driver, according to statistics from the world steel association.

Chen kexin, an analyst, said the strong growth in China's domestic demand for steel completely offset the drag of weaker exports, so China's total steel consumption remained robust in 2019.

However, based on the analysis of the macroeconomic situation, for the upcoming New Year, steel market pessimism is still obvious.

The price of steel has gone up again

On the winter steel price "inversion" before, the market is still on the afternoon of the interpretation of the market still hold "it is difficult to optimistic" argument, it is expected that the domestic steel market operation in November will be weak shock. This is based on the fact that as the weather turns cold and the market enters the traditional low season of consumption, the demand for construction steel gradually weakens, while the overall demand for manufacturing industry is still relatively weak. In addition, although the heating season has already arrived, the differentiated grading stop-limit management after the "one size fits all" is cancelled. With the promotion of ultra-low emission transformation of steel enterprises in various regions, more and more enterprises meet the standards, and the effect of production limit will be weaker than the previous two years. With the release of new production capacity, the high supply pressure of the steel industry will continue to appear.

But strong demand into the winter surprised the market. Wu told the economic observer that in addition to the mismatch between supply and demand caused by demand factors, supply has also been reduced due to a warmer winter and tighter production restrictions than in previous years.

The high consumption of crude steel in China in 2019 can be verified by the changes in the steel inventory level. According to the monitoring data, not only is the peak of social steel inventory (178.3 points) in 2019 significantly lower than the peak of last year (191.6 points) by 6.9 percentage points. As of November 15, 2019, the national steel social inventory index was 80.5 points, down 0.32% from the same period last year, and down 54.9% from the peak on March 1 this year.

Chen kexin, an analyst, believes that the national steel inventory level has not increased along with its strong production growth, indicating that the amount of crude steel added in 2019 has already entered the consumption sector. In this case, the national steel and steel production has increased significantly, that is, the total consumption has increased substantially.

According to Chen kexin, in the first 10 months of 2019, China's fixed asset investment grew by 5.2% year on year. Although infrastructure investment grew by 4.2%, slowing down, it is still growing, while investment in real estate development grew by 10.3%, continuing to operate at a high level, which ensured the rapid growth of domestic steel demand.

Xu xiangchun told the economic observer: "strong demand from construction sites in south China, combined with limited steel transport in the north and late arrival, has led to a rapid decline in inventories, especially in guangzhou, where prices rose more than expected. There is an abnormal situation that the price difference between the north and the south reaches 1,000 yuan."

According to the tracking data provided by the above institutions to the economic observer, the steel price difference between guangzhou and Beijing, jinan, shenyang and other northern regions has widened rapidly since November, and the price list of Shanghai, wuhan and other regions along the Yangtze river is also widening, with the largest price difference between guangzhou and shenyang reaching 1,000 yuan.

Xu xiangchun to the economic observer analysis: "at the end of the construction site there is a deadline, resulting in strong demand. "In the first half of November, the turnover of guangzhou traders increased by 40 percent compared with the same period last year."

Analyst zeng jiesheng to the economic observer analysis that since October, the beijing-tianjin-hebei, Yangtze river delta, fen and wei plain region heating season atmospheric management program has been issued, the program will be implemented from November 15, which makes the market to the effect of production limits brought expectations.

From 16 October to November 6, the ecological environment has been printed and distributed to the beijing-tianjin-hebei and surrounding areas fall and winter air pollution in 2019-2020 action plan for comprehensive control of engines, the Fen nutrient-laden plain autumn and winter air pollution in 2018-2019 action plan for comprehensive control of engines, the Yangtze river delta region in 2019 - air pollution in the fall and winter of 2020 action plan for comprehensive control of engines.

For the steel industry, the above three plans focus on three aspects: first, reducing steel production capacity. The plan calls for reducing steel production capacity in tianjin, hebei and shanxi by the end of December 2019, among which 14 million tons will be reduced in hebei. In addition, coking production capacity in hebei, shaanxi and shandong will be reduced by a total of more than 23 million tons. Second, upgrading to ultra-low emissions. By the end of December 2019, the plan calls for hebei, jiangsu, shanxi and shaanxi provinces to achieve a total of 212 million tons of ultra-low emission steel. Third, implement differentiated emergency management. In particular, the plan stressed that steel enterprises with an annual capacity utilization ratio of more than 120 percent can be appropriately raised in 2018.

Steel demand to rise by just 1 per cent next year?

On Oct. 16, the world steel association released its short-term steel demand forecast for 2019 and 2020. China's steel demand is expected to grow by 1.0 percent in 2020, according to the group's forecast, a figure that is significantly lower than the growth level in 2019.

According to the October macro data released by the national bureau of statistics, although most of the data were less than expected, but the real estate index with the largest correlation with steel consumption showed a bright performance, the growth rate of real estate investment fell slightly in October, but the new construction area, land purchase area, sales area and other indicators improved, better than expected.

Zeng jiesheng think, although the recent steel market appears rapid pull up, the market mentality is obviously improved, but for the next year the market is still not optimistic. According to the latest macroeconomic data released in October, downward pressure on the domestic economy has continued unabated. It is expected that in the short term, the government's macro-control policy will continue to be moderately relaxed, but it is difficult to launch a big stimulus policy under the general tone of sticking to the long-term structural adjustment.

Zeng expects real estate investment to remain high and not to decline significantly. Stimulated by the acceleration of special debt issuance and the reduction of infrastructure capital, infrastructure investment will rebound, but its strength will be limited. The end demand of the manufacturing industry will maintain a steady trend of growth, machinery, shipbuilding, home appliances continue to grow, the decline in automobile production and sales will moderate.

The world steel association, for its part, said strong growth in China's real estate market led to high growth in steel demand in 2019, but predicted a slowdown in 2020. The Chinese government is unlikely to launch another massive stimulus, which would strike a balance between curbing the slowdown and promoting economic restructuring, and is more likely to introduce some modest stimulus, focusing on infrastructure and boosting consumers' purchasing power through tax cuts. The auto industry may benefit from these incentives in 2020.

But for other manufacturing analysts, 2020 doesn't seem so gloomy. Lv Juan, chief analyst at citic construction investment machinery, said she maintained her outlook for "infrastructure investment is optimistic, real estate investment is not pessimistic, and manufacturing investment is expected to pick up" in the fourth quarter of this year and the coming year of 2020.

In terms of infrastructure investment, on the one hand, the quota of special debt in 2020 is expected to increase significantly compared with that in 2019, and some of it may be issued in the fourth quarter of 2019. On the other hand, it is expected that railway investment will be higher than the market believes that is about to level off, including the construction of important lines such as high-speed railway along the river and coastal high-speed railway is an important increment. In terms of real estate investment, although the growth rate of investment is on the decline, the rate of decline is very slow, and there are expectations of cutting reserve requirement ratio and interest rate. It is estimated that real estate investment will remain very resilient in 2020. Finally, in terms of manufacturing investment, on the one hand, local governments actively support high-quality small and medium-sized enterprises to enhance entrepreneurs' confidence in investment. On the other hand, 5G will help promote the upgrading and upgrading of industrial fields and stimulate investment, which is expected to pick up in the manufacturing sector.

The content comes from the network, the copyright belongs to the original author, if violated your rights and interests, please inform us, we will be deleted immediately, thank you!