“We are now looking forward to the future market, so the sales budget needs to be adjusted again.†A middle-level manager of Baosteel told reporters that after undergoing a sharp drop in orders since last October, orders received by the company in April and May began to increase. "Of course, this is a ring comparison. Compared with the same period last year, the number of orders is still not that much."
This optimistic view of future market expectations also implies hidden dangers of overcapacity and unrecoverable exports. Whether the steel industry can continue to pick up will also depend on the speed of release of steel production capacity.
Since the second half of 2008, the “Roller Coaster†market for the steel raw material market and steel market has caused most steel companies to pay expensive tuition fees. Only “high-priced inventory†has caused huge losses in the industry, and the whole industry has been in continuous since October. Lost for 4 months.
At the beginning of 2009, the steel industry was once revitalized before other industries, prices continued to rise for several weeks, but quickly faded after the Spring Festival. From the Spring Festival to the present, steel prices have experienced a continuous decline for seven weeks.
For the previous round of steel prices, the industry believes that due to the market's "false prosperity", leading to the mid-December steel mills began mid-December resumption of production, the downstream industry's demand continues to slump, the terminal demand did not start. The “de-stocking†of steel plants has also caused a dramatic increase in spot market inventory pressure and serious losses for traders.
According to the statistics of the China Iron and Steel Association, China’s crude steel production has increased rapidly since December of last year, with average daily output exceeding 1.2 million, 1.3 million and 1.4 million tons in succession, and 1.444 million tons in February, equivalent to an annual output of 520 million tons. (Last year, China's steel output was only 500 million tons). The rapid release of production capacity has also led to a substantial increase in social stocks. As of late February, the inventory of five types of steel in 20 large and medium-sized cities across the country reached 6.7 million tons, an increase of 137.9% from January.
This trend was curbed in March at the expense of a major steel mill. As of March 25, a total of 11 iron and steel production companies announced the shutdown of maintenance information in March, including Baosteel, Benxi, Shagang, Laiwu, Angang and other large and medium-sized manufacturing enterprises. According to report, Anshan Iron & Steel also plans to cut its output in April. Tangshan Iron and Steel began to arrange the cold rolling and hot rolling production line maintenance in April and May.
“Prices in May and June should gradually improve because many large projects are started at this time, such as the Shanghai-Hangzhou high-speed railway, which requires more than 1 million tons of rebar for two years.†Zhang Fugui, Manager, Business Center, Shanghai Shunchao Enterprise Development Co., Ltd. This point of view represents the view of most steel circulation companies. As steel production capacity is temporarily controlled, demand may “explodeâ€. Many traders are optimistic about the steel market in the second quarter.
“Although it is still not clear, I feel that the price of steel is not far from the bottom of the valley. It is estimated that '51' will basically stabilize prices,†said Wang Anguo, general manager of Anguo Trading Co., Ltd. of Shenyang.
The recovery of the steel market is not expected by all industry players. The top brass of a large northern steel plant stated that the steel market may rebound slightly in April. This has a lot to do with the recent launch of steel futures. However, the biggest problem in the steel industry is currently demand, while direct exports and steel are currently used. There has been no sign of recovery in industrial exports (indirect exports). This reduced demand may return to the domestic market, which may increase pressure.
The above-mentioned steel plant executives also pointed out that the national investment of 4 trillion yuan is mainly driven by infrastructure construction. This may increase the consumption of steel products at the front end in the short term, but it may also stimulate the resumption of production and capacity expansion of small and medium steel mills. Further increase the contradiction between supply and demand. “The temporary supply and demand balance is based on the reduction of production and production suspension of some companies, but it cannot fundamentally solve the problem of excess capacity in the Chinese steel industry, unless some companies completely withdraw from this market.â€
Steel prices near the bottom of the valley with excess capacity
Some employees of Baosteel's sales department have been working overtime recently and are busy modifying the sales budget for the first half of the year. The constant changes to the budget such as this year have been rare in the past. The complex changes in the steel market this year have made it impossible for Baosteel to make an accurate judgment on the budget for the entire year.