Turning My Steel -- Ren Zhuqian: The Steel Industry has shifted from a tight balance to a relatively loose one

At the theme conference on the 15th, Ren Zhuqian, a senior researcher of my steel network, delivered a speech on "The Steel Industry has changed from a tight balance to a relatively loose one-the release and interpretation of my 2019 report on steel". She first reviewed the 2018 steel industry.

In 2018, the steel market was dominated by the supply side, and the steel price was high and volatile throughout the year.
Summarizing the characteristics of this year's steel market, one is that the release of demand is close to one month later than in previous years; Second, environmental protection restrictions have expanded from local areas such as Beijing-Tianjin-Hebei to most of the country's key regions; Third, the overall performance of automobiles and household appliances in the first half of the year was dazzling. In the second half of the year, real estate investment gradually declined, and hedge infrastructure investment declined. In terms of raw materials, Coke and scrap steel continue to be tight and balanced, and iron ore performance is slightly weak; Fourth, the industry benefits continue to maintain a good state, the annual supply and demand of rough steel tight balance; Fifth, China and the United States trade and economic friction, environmental protection and production restrictions, and other uncertain environmental factors, has intensified the frequency of market fluctuations.
At present, the initial stage of the steel supply side reform has been completed, and the efficiency of the entire industry has been stabilized. The specific performance is to strictly control the new production capacity. The corporate debt ratio has gradually declined, and the debt ratio of key steel companies has dropped to 66 %, and the overall industry benefits have gradually improved; Production capacity utilization has taken the lead in growth and decline, and quality production capacity supply has expanded.
Combining one-year changes and steel-link survey data, in 2018, the annual crude steel output(in the table + outside the table) increased by 10 to 15 million tons, and the consumption of scrap steel increased by about 50 million tons, maintaining a tight balance between supply and demand throughout the year.
Looking forward to 2019, the industry will focus on four aspects: First, the Environmental Protection policy will become increasingly strict, and the indefinite production limit in the heavily polluted areas will affect the market supply, and then change the trend of phased steel prices; Second, whether the downstream can maintain a good amount of steel usage will determine the basic direction of the future steel market; Third, we need to pay attention to the impact of indirect exports of steel brought about by the Sino-U.S. economic and trade friction, as well as the domestic stable economy to increase investment promotion needs; Fourth, the 2018 target of 30 million tons of capacity removal will be successfully completed, and capacity removal may become a tool for steel prices.
At the macroeconomic level in 2019, in its latest World Economic Outlook in October, the IMF revised the economic growth forecast for 2018-2019 for most economies, strengthening the expectation that the global economy will peak in 2019. Domestically, if GDP is to remain at 6.4 per cent next year, infrastructure investment growth needs to be measured at 9 per cent.
In terms of capacity removal work, it is expected that the target capacity removal work in 2019 may come to an end, and in the future, steel production capacity will be controlled mainly through reduction replacement.
Environmental protection and production restrictions will become the norm in the future steel industry. In 2019, steel environmental protection emission standards will be refined and clarified.
On the supply side, it is estimated that the annual crude steel output in 2019 will increase by 1.2 %; On the demand side, according to the Shanghai Steel Union model, domestic crude steel consumption is flat or slightly increased by 0.03 % in 2019, and the growth rate of steel used in infrastructure is increasing. The growth rate of steel used in real estate, home appliances, and machinery industries will gradually slow down. Exports are estimated to increase slightly by 10 million tons.
In terms of raw materials, in 2019 Coke is still under pressure to remove production capacity, with a global increase of 39.3 million tons of iron ore, and the new demand for iron ore is only about 32 million tons. The supply and demand of iron ore remains tight.
Finally, Ren Zhuqian concluded that the growth rate of GDP will slowly decline next year. The supply and demand of steel will be balanced to relatively loose, and exports will increase slightly. The steel social inventory will enter the stage of accumulation. The trend of raw materials is differentiated, Coke is still stronger than iron ore, and scrap steel moves down with finished steel, and the price difference with pig iron is further reduced.
In terms of steel prices, the price of steel returned reasonably in 2019, and the overall move down one step. The average price of steel in the year was about 10 % lower than in 2018. The profit of steel production enterprises returns, and the regional difference is obvious.
Disclaimer: The above contents are personal academic views of the guests. They are not reviewed by the guests themselves and do not represent the views and positions of the website.