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Steel is caught in the "three highs and three lows" dilemma and needs long-term winter preparation
Some people have summarized the current difficulties of the steel industry as "three highs and three lows", that is, high cost, low price; high capacity, low demand; high inventory, low sales. The contrast between the three sets of contrasts clearly reflects the current living conditions of the steel industry. Due to overcapacity and sluggish demand, since the beginning of the year, steel has once sold “cabbage pricesâ€, resulting in a decrease of 95.81% in the profits of member companies of the China Iron and Steel Association (hereinafter referred to as “China Steel Association†in the first half of the year. 0.13%, after deducting investment income, the main business is actually at a loss. In this regard, China Steel Association Executive Vice President and Secretary General Zhang Changfu said, "from the international and domestic macroeconomic situation analysis and forecast of market demand, the domestic iron and steel enterprises to do against the difficult and long-term 'winter' mental preparation." Steel prices Steel prices have fallen into a dilemma. Since the beginning of the year, China's steel industry market demand has continued to be in a downturn last year, and steel prices have continued to fall. The domestic steel information agency "My Steel" Research Center analyzed that in the first half of this year, domestic steel prices experienced a small increase in the second and third months after the Spring Festival, but continued to decline after mid-April. By the end of June, the overall price of Pugang had fallen by at least 6% from the high point in mid-April. The general manager of a steel trade company used rebar as an example. “It sold for 4,400 yuan/ton before and after the Spring Festival. In the first ten days of July, it fell to 3,650 yuan/ton.†Many people in the industry have ridiculed that the steel price “has no minimum, only Lower". The opposite of the falling steel prices is the high price of raw materials and the high cost of financing. According to the monitoring data of China Steel Association, the price of imported iron ore rose from 136.3 US dollars / ton at the end of last year to 152.9 US dollars / ton in mid-May. In July, the average landed price of imported iron ore was affected by insufficient demand. It has been lowered, but still reaches $138.15/ton. In addition, according to the statistics of China Steel Association, the financial expenses of its member companies in the first half of the year increased by 37%. Some insiders said, "The irrational relationship between upstream and downstream prices has a similar effect on the profitability of steel companies." According to the China Steel Association, the steel companies in the first half of the year have realized profits. It was only 2.385 billion yuan, a significant decrease of 54.549 billion yuan, a decrease of 95.81%; the loss of loss-making enterprises was 14.248 billion yuan, and the loss reached 33.75%. If the investment income is deducted, the main steel industry is actually at a loss. The semi-annual report of listed steel companies also exposed the plight of the steel industry. The performance of listed steel companies that have issued notices has declined to varying degrees year-on-year. Among them, the largest year-on-year decline in performance was Songshan Songshan. The company expects a loss of 750 million yuan in the first half of the year, and net profit fell by 1309.71% year-on-year. The largest loss is expected to be Angang Steel. The company expects a loss of 1.976 billion yuan in the first half of the year. The decline was 998.1%. According to the analysis of “My Steel†information agency, except for Pangang’s performance of assets restructuring last year, its performance was not comparable with that of the same period of last year. Only Baosteel, Jiuli Special Materials and Jinzhou Pipeline were three steel companies. Performance is expected to increase. Demand continues to be low, overcapacity is worrying. The industry generally believes that the weak demand side and the rigid release of new capacity at the supply end are the root causes of the continued sluggish steel market prices. Since the beginning of this year, with the adjustment of the national economic growth mode, the economic growth momentum has slowed down, and the growth rate of steel demand has dropped significantly. Due to the decline in investment in infrastructure construction such as railways, the real estate control policy is still firm, and the market demand for steel industry, such as shipbuilding and machinery, has declined. In the first half of the year, the apparent consumption of crude steel in China has barely increased. Statistics show that the actual demand for crude steel this year is only about 600 million tons. Contrary to the sluggish demand, China's crude steel production capacity is growing at an annual rate of 7%, and crude steel production remains high. In April, China's daily average crude steel output has reached a new high of 2.01 million tons. According to the statistics of the China Metallurgical Construction Association in September last year, the data released by 46 design units showed that the capacity of steelmaking construction was 55.04 million tons, and the designed capacity was 19.3 million tons. The steelmaking capacity was planned to be 21.08 million tons, and the scale of construction stopped during the statistical period. 6 million tons. If these planning projects are also under construction and capacity is formed, the newly added crude steel production capacity will be nearly 90 million tons. The industry estimates that China's crude steel production capacity has expanded to 900 million tons and the actual output is 700 million tons. Li Xinchuang, deputy secretary-general of China Steel Association, once said that the current steel industry's production capacity is too high, almost filling the growth space for many years to come. Why is steel production capacity controlled? Zou Zhongkai, chairman of Shandong Iron and Steel Group Co., Ltd. pointed out that this is mainly due to the vicious competition between steel companies. In order to avoid the fate of being eliminated in the market competition, steel companies in some places are still expanding. While state-owned enterprises are eliminating production capacity, some private enterprises are secretly expanding. Local governments are interested in protecting these companies for expansion due to tax and employment considerations. Constraints highlight the golden nine silver ten difficulties to reproduce for the market outlook, industry insiders said that the current constraints on the steel industry rebound is still prominent, affected by the economic weakness, the steel market will continue to operate in low efficiency in the second half of the year, the traditional sales season "golden nine silver ten" is difficult Reproduction. Specifically, on the one hand, due to domestic economic restructuring and macroeconomic regulation and control, steel demand is still falling. This year's GDP growth rate of 7.5% will have a direct impact on the steel industry. It is expected that the steel market will not be better than last year. On the other hand, the scarcity of orders has led to the second highest level of inventory in steel producers. High stocks have forced many domestic steel mills to be forced to lower their ex-factory prices in July. The main contract of the Shanghai Futures Exchange's rebar futures plummeted from 4,000 yuan/ton at the beginning of July to 3,718 yuan/ton. In the spot market, manufacturers are also constantly reducing the ex-factory price of steel. The rebar of HRB335 in Guangdong market is reported at 3,900 yuan/ton, while the price of rebar in this specification is still above 4,100 yuan/ton. In the past few days, a total of 27 major steel mills across the country issued price adjustment information, ranging from 10 yuan / ton to 350 yuan / ton. Among them, the ex-factory price of construction steel has been significantly reduced compared with the previous day, and the reduction of ex-factory price of sheet metal has increased from the previous day. At the same time, some insiders pointed out that there are some favorable factors in the steel market. For example, the macro economy is showing signs of stabilizing the bottom of the market. Steel mills will start to cut production, steel production peaks will be spent, and downstream demand is expected to improve. Overall, the trend of steel in the second half of the year may be better than the first half, but overall growth is still limited. If the country does not have a big fiscal policy, it does not rule out the possibility of a steel company going bankrupt.