Steel supply and demand gradually improved

“Oversupply in the upstream and weak downstream demand” are considered to be the main reasons why domestic steel prices have continued to fall and rise so far this year and have made new lows. Since the second half of the year, this contradiction has gradually improved. Based on this, China Steel Spot Net believes that the rebound in the bottom price of steel prices is coming, but due to the impact of low cost and financial pressure, the height may be subject to certain restrictions.

Steady growth projects pushed up fixed investment, and the steel market's demand may have improved significantly.

In the first half of the year, the domestic economy fluctuated at a low level, fixed investment continued to fall, and real estate was rarely weakened. It affected domestic economic growth plans. In order to complete the year-on-year GDP growth rate of 7.5%, the central government and local governments at all levels started to stabilize. With the growth of investment projects and the cancellation of the property purchase restriction policies in many regions across the country, the weak property market is also expected to improve. Therefore, the growth rate of fixed investment in the country in the second half of the year should increase rapidly. It is expected that a number of major investment projects will accelerate in the second half of the year. Will greatly stimulate the release of steel demand.

According to statistics on the information already collected, the focus of subsequent major engineering projects will focus on the construction of railways in the Midwest, shed change, water conservancy and power projects, and municipal infrastructure construction. As these projects enter the construction phase, China The steel demand will also usher in a rapid release process. Among them, the speed of transformation and construction of shantytowns must be more than 4.7 million, an increase of 47%, and the fiscal, CDB special loans and social financing environment should be improved to effectively solve the shed financing reform environment, and accelerate the implementation of shed reform projects. Further increase the construction of railways, urban transportation, etc. This year, the total number of railways has been increased by overweight railways for three consecutive years. The planned investment will be increased from the original RMB 630 billion to RMB 800 billion, and a number of railways will start construction ahead of schedule this year; at the same time, urban rail transit construction With huge demand, the acceleration of new urbanization will inevitably increase the already congested urban traffic. By 2020, China will have 4 trillion yuan of funds invested in urban rail transit construction. The investment in urban infrastructure construction will also increase greatly; the urbanization of 100 million people will not be satisfied by the current urban infrastructure. The supporting facilities such as the urban pipe network, medical care, and education will usher in another peak demand in the future. Investing at least a few trillion yuan. Others include the construction of infrastructure such as water conservancy and hydropower, energy pipelines, and the construction of municipal infrastructure for rural areas and backward small and medium-sized towns. With the advancement of urbanization, construction will continue to increase.

After a relatively long period of preparations, especially with the assistance of many parties, the financing issue has made great progress. A major investment project will usher in a climax of centralized construction in August; it may further stimulate the release of steel demand; steel demand is basically Face is expected to be significantly improved.

Efforts to eliminate backward production capacity and steel output growth may be effectively curbed

When the downstream terminal demand has gradually been actively improved, upstream production is also good news; the country is actively based on the overall idea of ​​energy-saving emission reduction, is actively compressing production capacity, regulate production planning, especially since this year, achieved significant results. China Steel Spot Network believes that this ill-health will be able to achieve more significant breakthroughs this year. The credit lies in the clear and more pragmatic regulation of upstream policies. The other is that the increase in market price forces the steel mills to adjust actively to adapt to market survival.

In the aspect of policy control, we have eliminated a single policy of eliminating backward production capacity, and more than 20 measures have been put in place to form a concerted policy. The State Council clearly stated that it is forbidden to build new capacity projects, resolutely eliminate backward production capacity, and integrate decentralized steel production capacity. The key cities have compressed more than 80 million tons of steel production capacity. It also requires compliance with the new capacity to implement a reduction in capacity replacement, effective control of new additions, and further increase the elimination of backward production capacity. At the same time, in the area of ​​environmental protection, environmental protection thresholds have been raised, and the actual production of a large number of unqualified small and medium-sized steel plants has been controlled and controlled; in addition, historical methods of assessing local government heads with simple GDP have been canceled, and local governments have been stimulated to be more proactive. The elimination of outdated production capacity in the region; Banks are also introducing measures to further limit credit grants to non-compliant steel enterprises, and can effectively control the scale of production capacity addition and actual production.

In the face of the market forcing steel mills, the serious surplus of steel production capacity and large crude steel production have already brought the market with a conflict of excess supply and demand. With the slowdown of economic growth, the economic structure has been transformed and upgraded, and the actual downstream steel demand has also increased. Showing the top of the arc fell. When supply growth is much faster than demand growth, under the market's choice, excessive price competition has already caused a large number of steel mills to face more and more serious financial pressure; even some steel mills have already gone bankrupt because of capital chain breaks. The trend will continue to evolve in the later period. Therefore, the author believes that after the increase in the market's multi-directional choices and the pursuit of quality from steel to quality, it will continue to force steel mills to reduce the quantity and improve their quality to meet market demand.

In general, the author believes that although the current steel mill operating rate is above 95%, China’s crude steel production has repeatedly hit a record high, but the new record low steel social inventory shows that the current supply and demand relationship is relatively stable, plus many The construction of micro-stimulation projects will begin soon, and the release of downstream demand will not be far behind; therefore, for the steel prices that are constantly under investigation, there is not much room for decline, waiting for the improvement of fundamentals of demand, and the probability of bottom rebound of steel prices is very high. .