Forecast: Next year's decline in steel consumption growth rate is flat this year

A senior industry analyst at the My Steel Research Center predicted the trend of the steel industry in 2011 in the Gasgoo Online Management Forum on October 27, 2010. She believes that by 2011, the growth rate of steel consumption will be lower than 2010. However, the annual average price may maintain the 2010 level.

In a speech at the Gasgoo.com online management forum, the analyst first reviewed the financial tsunami triggered by the US subprime mortgage crisis and caused a huge blow to the steel industry. The global financial crisis in 2008 eliminated the bubble in the Chinese steel industry, resulting in a sharp drop in steel prices by 40-50%; in 2009, the state implemented a four trillion economic stimulus plan to stimulate the economy, and the steel industry from 2009. The bottoming out prices in March and April began to start and climbed all the way to July and August. This made the steel industry as a whole not to be in the off-season and not prosperous during the peak season. This situation did not return to normal until 2010. In 2010, the steel price returned to normal and remained at a relatively high level. The volatility was in a narrow range. Steel prices rose from the beginning of 2010 to April and then fell to the entire fluctuation range in July. The volatility did not exceed 20%. Out of the upward trend of shocks, and accompanied by periodic fluctuations.

For the above reasons, My Steel analysts believe that the economy is an important factor influencing the trend of steel prices. From 2009 to 2010, the global economy was in a period of slow recovery. Although the growth rate of major economies in the world has slowed down, its manufacturing index is still expanding, and the rate of decline has begun to narrow, accompanied by some setbacks. During this period, steel was affected by the economic environment and recovered from the crisis: the utilization rate of global steel production capacity climbed from the low of 58.1% in 2008 and reached 82% in 2010, returning to the pre-crisis level; even in the second half of the year. Capacity utilization fell to 70%, which is also at a high level. At the same time, in the first eight months of this year, the output of crude steel in developed countries led the way in the same period of last year, reaching over 37%-50%, far exceeding the world average. This also drove the recovery of the steel industry.

For the domestic economy, as the country's macroeconomic control efforts increase, the national economy has gradually shifted from striding toward small steps and stabilizing. In the first half of 2009, the country’s sudden tightening of monetary policy and strong regulation of the real estate sector all made the overall macroeconomic policy unfavorable. In the second half of the year, China’s macroeconomic growth slowed down and its fiscal policy was relatively relaxed. The government will handle the relationship between maintaining stable and rapid economic development, adjusting the economic structure, and managing inflation expectations as the core of macroeconomic control. This series of policies has caused the growth rate of fixed asset investment to fall to 30%-25%, and at the same time, the growth rate of imports and exports has increased. There is also a certain degree of decline. To a certain extent, it also inhibits the rapid growth of the steel industry.

According to data from the My Steel Research Center, the steel industry has also been severely affected by market supply and demand. On the one hand, since the beginning of 2010, the output of crude steel fell back by a high of 40%. On the other hand, due to the impact of energy-saving and emission-reduction policies and the elimination of outdated policies, steel companies have been severely affected, reducing production by 40%-60%. Coupled with the sharp decline in foreign steel demand, the domestic steel exports to cancel the tax rebate, the sharp decline in steel exports, special steel exports fell by 24% -67%, while the average steel exports have also dropped by 15% -20%.

For the downstream demand of the steel industry, as the real estate industry is severely suppressed by a severe policy and is at a relatively weak level, and the auto industry is also in a transition period of industrial adjustment, the demand for steel is relatively weak. It is expected that in the beginning of 2011, the demand for steel from the real estate industry and the auto industry will continue to weaken, but the machinery industry, household appliance industry and shipbuilding industry will all maintain relatively stable demand. Therefore, mid-board and cold-rolled steel are also optimistic about the market.

My Steel analysts believe that the more serious impact on the steel industry comes from the increase in the cost of steel production, which directly led to the shrinking profits of the steel industry. From January to August this year, 77 large and medium-sized iron and steel enterprises realized a profit of 57.918 billion ***, an increase of 131.53% over the same period of the previous year, but the profit rate of large and medium-sized steel enterprises was only 2.92%. In 2009, the profit rate of steel sales was 2.43%, which was less than half of the national average of 5.47%. At the same time, the value of the industrial chain quickly shifted to the upper reaches. The price of iron ore agreements rose and fell. The quarterly pricing brought greater challenges to the cost control of steel mills. With the acceleration of iron ore financialization, financial capital has accelerated. Participating in speculation further increased the cost of the steel plant. As iron ore is relatively strong under the twin factors of strong demand and oligopolistic pricing, the profits of steel mills have been squeezed to a limited extent, and there is limited room for cost reduction in the fourth quarter.

Overall, My Steel analysts believe that the cost of steel in the fourth quarter of this year is unlikely to fall or rise sharply in the forecasting forum of Gasgoo.com; steel prices will be affected by the regulation of energy-saving and emission reduction policies, while the steel market The improvement of supply and demand has led to a rise in steel prices. However, due to the influence of ** and electronic trading, steel prices do not have the conditions of sharp and rapid rise from current stage to New Year's Day, and it is difficult to rush past the high prices in April. However, it is also necessary to guard against significant fluctuations caused by policy changes. In early 2011, steel prices will have a certain decline, but from the perspective of the next year, steel prices will remain at 2010 levels.