Steel market heating up again: the south in a hurry to catch up with the north steel prices rise

Wu Wenzhang to the economic observer analysis, "supply and demand mismatch" is the main reason for this winter's steel price against the market: winter is the low season of steel demand, but this winter's demand performance is strong, and inventory is low, which brings about the mismatch between supply and demand.

　　On October 24th the steel price index on the Shinkansen was 3,940, but by November 21st it had risen to 4,390. The rapid rally in just over 20 days has come as a surprise to the market, which had not been optimistic about the winter steel market. Wu article to the economic observer analysis, "supply and demand mismatch" is the main reason for this winter's steel price against the market: winter is the low season of steel demand, but this winter's demand performance is strong, and inventory is low, which brings about the mismatch between supply and demand.

　　With just over a month to go until the end of 2019, the rebound in winter steel prices is likely to bring the steel industry to a successful start again this year. Data from the National Bureau of Statistics show that despite the decline in profits of large steel companies, in the first three quarters of this year, the main business revenue of the domestic steel industry was 5.33 trillion yuan, up 8.5% YoY, and profit s470.4 billion yuan, up 39.3% YoY.

　　According to statistics, the total demand for crude steel in the first 10 months of this year was about 840 million tons, up about 8% year-on-year, and the total demand for crude steel in China is expected to be close to or reach 1 billion tons for the whole year. According to the World Steel Association, the main region spending global steel growth in the first nine months of 2019 was Asia, with China as the central source of power.

　　Chen Kexin, an analyst, said strong growth in domestic demand for steel in China had completely hedged against weaker exports, so total steel consumption in China remained strong in 2019.

　　However, based on the macroeconomic situation, the steel market for the coming year, the pessimism is still evident.

　　Steel prices are going up again.

　　On the winter steel prices "reversal" before the market's interpretation of the market is still more "difficult to be optimistic" tone, the domestic steel market is expected to be weak in November. This is based on the cold weather, the market into the traditional consumption of the off-season, construction steel demand gradually weakened, while manufacturing demand is still relatively weak overall. In addition, although the heating season has come, but the abolition of the "one-size-fits-all" after the differential graded stop production management, with the promotion of ultra-low emission spending transformation of steel enterprises around the country, more and more enterprises in line with the standards, the effect of limited production will be weaker than the previous two years, the release of new capacity, so that the steel industry will continue to show high supply pressure.

　　But the market has been surprised by the continued strong demand heading into the winter. Wu article to the Economic Observer, said that the demand factors brought about by the mismatch between supply and demand, supply is also due to this year's warm winter, limited production than in previous years to increase the intensity of the reduction.

　　China's total crude steel consumption in 2019 is strong, which can be verified from the change of steel inventory level. Monitoring data show that not only in 2019 the peak of national steel social inventory (178.3 points) is significantly lower than the previous year's peak (191.6 points) 6.9 percentage points. As of November 15, 2019, the national steel social inventory index stood at 80.5 points, down 0.32% year-on-year, compared with the peak of inventory on March 1, 2019, down 54.9%.

　　Analyst Chen Kexin believes that the national steel inventory level has not followed the strong growth in its output and increased, which indicates that the amount of crude steel produced in 2019 has entered the consumer sector. In this context, the country's steel and steel production increased significantly, that is, the total consumption of a substantial increase.

　　Chen Kexin believes that in the first 10 months of 2019, china's fixed asset investment grew by 5.2% year-on-year, although infrastructure investment grew by 4.2% and the growth rate fell, it is still growing, while real estate development investment grew by 10.3%, continuing to operate at a higher level, which guaranteed the rapid growth of domestic steel demand.

　　Xu Xiangchun told the Economic Observer: "South China site demand is strong, coupled with the northern steel transport restrictions, arrival is not timely, resulting in inventory decline too fast, especially in Guangzhou prices rose more than expected." There is an abnormal situation where the north-south price difference is 1000 yuan. "

　　According to the tracking data provided by the above-mentioned institutions to the Economic Observer, the price difference between Guangzhou and Beijing, Jinan, Shenyang and other northern regions has expanded rapidly since November, and the price list along the Yangtze River, such as Shanghai and Wuhan, is also widening, with the largest price difference between Guangzhou and Shenyang, the difference between 1000 yuan.

　　Xu Xiangchun to the Economic Observer analysis: "At the end of the year, there is a rush to the construction period, triggering strong demand." We count the first half of November, Guangzhou traders turnover increased by 40% compared to the same period last year. "

Analysts Have won to the economic observer analysis that since October, Beijing-Tianjin-Hebei, Yangtze River Delta, the Plains area of the heating season of the atmospheric management program has been introduced, the program will be implemented from November 15, which gives the market to the effect of production restrictions brought expectations.

For the steel industry, the above three programs highlight edgy three aspects: First, pressure reduction capacity, the plan requires that by the end of December 2019, Tianjin, Hebei, Shanxi have steel production capacity reduction, of which Hebei pressure reduction can reach 14 million tons, in addition, Hebei, Shaanxi, Shandong pressure reduction coking capacity of more than 23 million tons. Second, ultra-low emission transformation. The plan calls for a total of 212 million tons of ultra-low emissions of steel in Hebei, Jiangsu, Shanxi and Shaanxi by the end of December 2019. Third, the implementation of differentiated emergency management. In particular, the programme stressed that steel enterprises with capacity utilization rates of more than 120% in 2018 could be appropriately increased.

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