The steel industry has basically bottomed out. The steel price is expected to rise slightly in the second quarter
Recently, the export of the steel industry has dropped sharply year on year, but it has stabilized month on month. At the same time, the state has raised the export tax rebate rate of some steel products, which plays a positive role in future steel exports. The steel price has lost money again after the second bottoming, but this supports the steel price. From the perspective of future export situation, downstream demand and current cost support, the industry has basically bottomed out, and it is expected that the steel price will rebound in the near future.
Both output and export declined
The ten day output report of China Iron and Steel Industry Association shows that the average daily output of crude steel in the first ten day of March 2009 decreased by 130000 tons month on month. The estimated daily average output of crude steel nationwide in the first ten days of March this year was 1.378 million tons, a decrease of 132,000 tons compared with 1.51 million tons in the last ten days of February. This is the first time that the average daily output of crude steel has decreased by ten days since this year, and it is also the result of the steel mill's production reduction again due to the falling price. Due to the production reduction and the high base in the same period of 2008, it is expected that the output of crude steel in March 2009 will increase from a positive growth in January and February to a negative growth.
Affected by the decline of exchange rate and foreign demand, domestic steel exports declined rapidly. In February, the export of steel was only 1.56 million tons, down 50% year on year and 18% month on month. In February, the net export of domestic crude steel (steel+billet) was only about 200000 tons. The export situation is grim.
According to the latest statistics of the customs, China exported 1.67 million tons of steel in March, an increase of 120000 tons over February. Although the year-on-year decline was 59.76%, the month on month recovery was 7%. The net export of steel in March was 400000 tons, better than the market expectation. Although the European Union and the United States intend to conduct anti-dumping investigations on some domestic steel products recently, the amount of steel exported to the United States and the European Union is very small (100000 to 200000 tons/month in total), and anti-dumping will not cause further deterioration of exports.
In the second half of 2008, except for Japan, the exchange rates of the currencies of the major steel exporting countries against the US dollar depreciated to varying degrees, while the exchange rate of the RMB remained relatively stable with the US dollar, resulting in a sharp decline in the cost advantage of China's steel products in foreign markets. The loss of low cost advantage as the core competitiveness is the main reason for the sharp drop in recent exports.
Low price and high cost performance are the core competitiveness of domestic steel exports. However, due to exchange rate fluctuations and the sharp drop in scrap costs, the sharp price difference for foreign products in 2008 is no longer large, making domestic steel enterprises have lost the competitiveness of export products, which is also the main reason for the sharp decline in Jingqi steel exports.
The price is expected to rebound slightly
First of all, the RMB exchange rate may depreciate along with the US dollar, which is conducive to steel exports. According to the judgment of CITIC Securities macroeconomic research team, the strong US dollar at the end of 2008 will be difficult to sustain, and the US dollar will weaken against the currencies of emerging markets and commodity exporters. In fact, the rupee, the Korean won and other currencies have got rid of the trend of repeated devaluation against the US dollar, and have appreciated significantly recently. If the trend of RMB and USD remains relatively stable, the price advantage of domestic steel products may reappear.
Secondly, there is still much room for future adjustment of export tax rebate. This adjustment does not involve ordinary carbon hot rolling and ordinary carbon medium plate, which account for a large proportion of steel exports. At present, only a small number of steel products have 13% export tax rebate, most of which have no export tax rebate or low tax rebate rate, and even 25% and 15% export tariffs are levied on steel billets and building materials respectively. Different from other industries, there is much room for adjustment of export tax rebate in the future.
The situation of steel exports in the future is still very bad. In March, steel exports grew slightly, slightly exceeding market expectations. Although we can't recognize that the inflection point of steel exports is coming, we can at least think that the export situation may not continue to deteriorate on a month on month basis. If the global economy improves in the future or the export tax rebate adjustment plays an effective role, the future export may gradually improve.
Finally, cost support. If the price of iron ore is 700 yuan/ton (including tax on spot) and coking coal is 1050 yuan/ton (including tax on delivery), the cost of pig iron is about 2000 yuan/ton (excluding tax). With the addition of steelmaking, rolling and other expenses, the cost of wire rods and threads should be 2600-2800 yuan/ton, while the current price of materials and threads including tax is 3100-3200 yuan/ton, excluding tax 2650-2735 yuan/ton. In March, the steel enterprises suffered losses again. Some steel mills have slowed down production recently and started to reduce production. If the current low price of steel continues in the future, or continues to dip, it will lead to further production reduction or shutdown of steel mills.
Demand is gradually warming up
Although the steel demand is still in a sluggish state in the future, we believe that it will gradually warm up and the demand will gradually recover from the bottom, mainly due to the seasonal growth of demand in the second quarter; Downstream industry grew better than expected; The 4 trillion yuan investment was gradually implemented and started to drive steel consumption.
Because the cold weather in northern winter is not conducive to construction, winter is the traditional off-season for steel consumption. With the gradual warming of the temperature, the demand for steel will increase seasonally, especially for construction steel. According to our estimation of investment in railway, highway, power grid and pipeline construction, 2.3 trillion yuan of infrastructure investment needs to consume about 100 million tons of steel. That is to say, in the next two years, these ten measures alone will drive the consumption of 40-50 million tons of steel every year. As the implementation, allocation, planning and design of the specific projects with an investment of 4 trillion yuan will take some time to complete, the current 4 trillion yuan investment in steel consumption is still only expected. We expect that from the second half of the year, the 4 trillion yuan investment will gradually stimulate the steel consumption, which will help the steel industry to get out of the trough as soon as possible.