INDUSTRY NEWS
Steel market upside in February or limited
In January 2020, the domestic steel market fluctuated slightly, mainly due to the concentration of holidays before and after the Spring Festival and traders, and the steel market gradually entered a market with no value. According to monitoring by Mysteel, as of January 21, the average price of 20mm three-level rebar in major cities across the country was 3834 yuan / ton, which has basically been running smoothly this month; the average price of 4.75mm hot rolled coil has been 3839 yuan / ton, which has decreased by 26 yuan / ton in the month . It is expected that the steel market will fluctuate roughly or in February in February. Even if there is a periodical increase due to the recovery of demand, the space may be limited.
1. Chinese New Year factors lead to a decline in steel output in January, which is expected to increase slightly in the first two months.
In January 2020, the steel market fluctuated slightly, but the prices of raw materials such as iron ore, coke and scrap steel rose to varying degrees, resulting in further increases in steel mill costs. The author estimates that before the Spring Festival, the gross profit per ton of steel in the rebar of Tangshan Changfeng Steel Mill (the cost does not include three expenses, depreciation, etc.) was about 200 yuan / ton. Most independent electric arc furnace building material steel mills have the same profit and loss, and a small part has a loss of more than 100 yuan / ton.
Because the blast furnace plant made a small profit, although the maintenance was arranged before the holiday, the intensity was not great. Mysteel surveyed 247 steel mills. Last week, the average daily output of hot metal was 2.2057 million tons, a decrease of 14,800 tons from the previous month and an increase of 67,700 tons from the same period last year. Generally, EAF steel mills will suspend production before the holiday, and basically stop production during the Spring Festival. Mysteel surveyed 71 electric arc furnace steel plants across the country. Last week's crude steel output was 301,300 tons, a decrease of 310,800 tons.
In summary, due to the impact of the Spring Festival, the blast furnace plant and electric furnace plant in January 2020 reduced production to varying degrees. It is expected that the average daily output of crude steel in the country this month will be more than 2.6 million tons, lower than 2.718 million tons in December 2019, It was higher than 2.535 million tons in January-February 2019. Considering that steel mills resume production in February, supply pressure will further increase.
2.This year's investment in infrastructure projects, real estate cooling, and weak demand for steel
In 2019, investment in infrastructure and manufacturing increased by 3.8% and 3.1% year-on-year, showing low-speed growth, but real estate investment increased by 9.9% year-on-year, showing rapid growth, which has become the main force driving the growth of demand for construction steel. According to Mysteel's survey of 237 mainstream traders across the country, the turnover of building materials in 2019 was 44.284 million tons, up from 41.78 million tons in 2018, an increase of 6% year-on-year.
As the real estate market continues to cool, especially in 2019, the land purchase area will drop by more than 10%. It is expected that the real estate new construction area and investment growth will decline in 2020, which will hardly drive the demand for construction steel. However, with the accelerated expansion of local government special debt, it is expected that the growth rate of infrastructure investment will pick up slightly in 2020. The marginal recovery of the manufacturing industry has shown that investment is expected to grow steadily.
In summary, in the first quarter of this year, infrastructure investment may be boosted, and real estate has no expectation of pulling steel demand. Construction steel demand is expected to be flat or slightly higher than the same period of the previous year. Generally, downstream construction sites will resume work 2-3 weeks after the holiday, and then they will pay attention to the transaction volume.
3.After the holiday this year, the pressure of destocking in steel mills is obviously greater than the market inventory
According to a survey by Mysteel, the social steel inventory in the second week before the holiday (as of January 17, 2020) was 10.23 million tons, which was 317,000 tons higher than the second week before the holiday. It is estimated that the social steel stocks during the Spring Festival this year may reach 14-15 million tons, which will not change much from 14.56 million tons during the Spring Festival last year.
According to Mysteel survey, the steel stocks of the sample steel mills in the second week before the holiday (as of January 17, 2020) were 4.83 million tons, which was 662,000 tons higher than the second week before the holiday. It is estimated that steel stocks of steel mills during the Spring Festival this year may reach more than 7 million tons, which is higher than 6.54 million tons during the Spring Festival last year.
4. The steel market has experienced more ups and downs over the past ten years
According to statistics from Mysteel, the average national rebar price in the first week before the Spring Festival of 2019 was 3,952 yuan / ton, which is a big difference from the same period in 2018, and it showed a narrow range of shocks after the Spring Festival. In addition, from the data of the past ten years, the price of rebar increased sharply in the second week after the Spring Festival, and the decline was small.
According to statistics from Mysteel, the average national hot coil price in the first week before the Spring Festival in 2019 was 3791 yuan / ton, a year-on-year decrease of 8.41%. In addition, from the data of the past ten years, the 70% probability of the hot coil price will rise slightly in the second week after the Spring Festival. Compared with the first three weeks, it is significantly enlarged.
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