Since the beginning of this year, thanks to the optimization and adjustment of previous epidemic prevention and control policies, the macro policy effect has been evident, the domestic steel market has performed moderately, and multiple indicators have been achieved
The steady recovery, even rapid growth, is manifested in the following four aspects: the stable recovery of steel market related indicators. In the first two months of this year, China’s steel market related indicators showed a steady recovery and even rapid growth momentum. According to the National Bureau of Statistics, from January to February this year, the added value of industries above designated size nationwide increased by 2.4% year-on-year; National fixed assets investment (excluding farmers) increased by 5.5%, 0.4 percentage points faster than that of 2022. Among them, industrial investment increased by 10% year-on-year, and infrastructure investment increased by 9% year-on-year, with a strong rebound. Although the national real estate development investment decreased by 5.7% year-on-year, the decline has been significantly narrowed and is developing well. The macroeconomic recovery has significantly driven the general improvement of related indicators in the steel market, and domestic steel demand has also improved accordingly.
Steel exports showed a rapid growth situation. According to the statistics of the General Administration of Customs, from January to February this year, China’s steel export volume was 12.19 million tons, a year-on-year increase of 49%. The author believes that the main reason for the strong growth of steel exports is the “tight supply and high prices” in the international market, highlighting the competitive advantage of China’s steel prices. According to monitoring data from Lange Iron and Steel Research Center, in early March, China’s export hot rolled coil price (FOB) was $60/ton to $160/ton lower than that of other major hot rolled coil exporting countries.
The author expects that in the short term, the pattern of “tight goods and high prices” in the international market will be difficult to change. On the one hand, in February of this year, the global PMI (Purchasing Manager Index) rose for two consecutive days on a year-on-year basis, approaching the boom and bust line. On the other hand, except for China, the world’s steel supply has not yet fully recovered, and steel production in most countries and regions has declined year-on-year. Affected by this, China’s steel enterprises currently have sufficient export orders. According to statistics, in February, the index of new export orders for steel circulation enterprises nationwide was 51.5%, up 3.4 percentage points from the previous month. The author expects that in the first quarter of this year, China’s steel exports will increase by more than 40% year-on-year. Second, indirect steel exports continued to maintain a growth situation. According to the statistics of the General Administration of Customs, from January to February this year, China’s total export value of mechanical and electrical products increased by 0.4% year-on-year, accounting for 58% of the total export value. Among them, the total value of automobile exports was 96.83 billion yuan, a year-on-year increase of 78.9%. According to the statistics of the China Construction Machinery Industry Association, in the first two months of this year, the total export value of mining machines nationwide increased by 34% year-on-year, while the total export value of loaders increased by 15% year-on-year. The author expects that in the first quarter of this year, indirect steel exports will continue to maintain a high growth rate
Fourth, steel production has shifted from declining to rising, and steel prices have fluctuated and increased. In 2023, driven by domestic and foreign demand, China’s production of steel and finished products has shifted from a decline to an increase. From January to February this year, China’s crude steel production reached 168.7 million tons, an increase of 5.6% year-on-year; The production of steel reached 206.23 million tons, a year-on-year increase of 3.6%. The author expects that the growth situation of the national production of crude steel and finished products will not change in the first quarter of this year. At the same time, due to the accelerated release of demand and strong impact of positive expectations, steel prices fluctuated and rose. As of March 15, the comprehensive price of steel nationwide rose 6.8% compared to the end of last year
The author believes that with the overall stabilization and recovery of the macro economy, the steel market will also rise in demand, production, and price. At the same time, it should be noted that this year, the external environment is still complex and volatile, and there are still many uncertain factors. In particular, the recent collapse of some overseas financial institutions has increased the risk of spillovers, and China’s steel exports will face many challenges in the future. Overall, the author expects that the overall trend of the steel market this year is still good, and the market is expected to stabilize and rebound. However, market participants should be cautious in their optimistic expectations.
Post time: Mar-24-2023