The steel industry has basically rebounded from the bottom. Steel prices are expected to rise slightly in the second quarter

Recently, the export of iron and steel has declined sharply on a year-on-year basis, but the month on month basis has stabilized. At the same time, the state has raised the export tax rebate rate of some steel products, which has played a positive role in future steel exports. Steel prices suffered losses again after the second bottom, but this supported steel prices. From the perspective of future export situation, downstream demand and current cost support, the industry has basically rebounded from the bottom, and steel prices are expected to rebound in the near future.
Both production and exports have declined
The ten day output report of China Iron and Steel Industry Association shows that the average daily output of crude steel in the first ten days of March 2009 decreased by 130000 tons month on month. The average daily output of crude steel in the first ten days of March this year is estimated to be 1.378 million tons, which is 132000 tons less than the 1.51 million tons in the last ten days of February. This is the first time since this year that the average daily output of crude steel has dropped for 10 days, and it is also the result of the steel mill's production reduction again due to the price drop. Due to the production reduction in the same period of 2008 and the high base, it is expected that the crude steel output in March 2009 will change from a positive growth in January to February to a negative growth.
Affected by the falling exchange rate and foreign demand, domestic steel exports fell rapidly. In February, the export of steel was only 1.56 million tons, down 50% year on year and 18% month on month. In February, the net export of domestic crude steel (steel+billet) was only about 200000 tons. The export situation is grim.
According to the latest statistics of the customs, China's steel exports in March reached 1.67 million tons, an increase of 120000 tons over February. Although the year-on-year decrease was 59.76%, the month on month recovery was 7%. The net export of steel in March was 400000 tons, better than the market expectation. Although the European Union and the United States intend to conduct anti-dumping investigations on some domestic steel products recently, the amount of steel exported to the United States and the European Union is very small (100000~200000 tons/month in total), and anti-dumping will not cause further deterioration of exports.
In the second half of 2008, except Japan, the currencies of major steel exporting countries depreciated against the U.S. dollar to varying degrees, while the exchange rate of RMB against the U.S. dollar remained relatively stable, leading to a sharp decline in the cost advantage of China's steel products in foreign markets. The loss of low-cost advantage as the core competitiveness is the main reason for the sharp decline in recent exports.
Low price and high cost performance are the core competitiveness of domestic steel exports. However, due to the fluctuation of exchange rate and the sharp decline of scrap costs, the sharp price difference of foreign products in 2008 was no longer large, which made domestic steel enterprises lose the competitiveness of export products, which is also the main reason for the sharp decline of Jingqi steel exports.
The price is expected to rebound slightly
First of all, the RMB exchange rate may depreciate with the US dollar, which is conducive to steel exports. According to the judgment of the macroeconomic research team of CITIC Securities, the strong dollar at the end of 2008 will be difficult to maintain, and the dollar will weaken against emerging market currencies and commodity exporters. In fact, the rupee, Korean won and other currencies have got rid of the trend of repeated devaluation against the US dollar, and have appreciated significantly recently. If the trend of RMB and USD remains relatively stable, the price advantage of domestic steel products may reappear.
Secondly, there is still much room for adjustment of export tax rebate in the future. This adjustment does not involve ordinary carbon hot rolling and ordinary carbon medium plate, which account for a large proportion of steel exports. At present, only a few steel products have 13% export tax rebate, most of which have no export tax rebate or low tax rebate rate, and even impose 25% and 15% export tariffs on steel billets and building materials respectively. Different from other industries, there is much room for adjustment of export tax rebate in the future.
The situation of steel export in the future is still very bad. In March, steel exports increased slightly, slightly higher than market expectations. Although we cannot admit that the inflection point of steel export is coming, we can at least think that the export situation may not continue to deteriorate month by month. If the global economy improves or the export tax rebate adjustment plays an effective role in the future, the future export may gradually improve.
Finally, cost support. If the price of iron ore is 700 yuan/ton (tax included), the price of coking coal is 1050 yuan/ton (tax included), and the cost of pig iron is about 2000 yuan/ton (tax included). In addition to the costs of steelmaking and rolling, the cost of wire rods and threads should be 2600-2800 yuan/ton, while the current price of materials and threads including taxes is 3100-3200 yuan/ton, excluding 2650-2735 yuan/ton. In March, the steel enterprises suffered losses again. Some steel mills have recently slowed down production and started to reduce production. If steel prices continue to maintain the current low level or continue to fall in the future, it will lead to further production reduction or shutdown of steel mills.
Demand is heating up
Although the demand for steel is still in a sluggish state in the future, we believe that it will gradually recover, and the demand will gradually rise from the bottom, mainly due to the seasonal growth of demand in the second quarter; Downstream industry growth is better than expected; The 4 trillion yuan investment has been gradually implemented and started to drive steel consumption.
As the cold weather in winter in the north is not conducive to construction, winter is the traditional off-season for steel consumption. With the gradual warming of temperature, the demand for steel will increase seasonally, especially for construction steel. According to our estimation of investment in railway, highway, power grid and pipeline construction, 2.3 trillion yuan of infrastructure investment needs to consume about 100 million tons of steel. That is to say, in the next two years, these ten measures alone will drive 40 - 50 million tons of steel consumption every year. As the implementation, configuration, planning and design of specific projects with an investment of 4 trillion yuan will take some time to complete, the current investment in steel consumption of 4 trillion yuan is only expected. We expect that from the second half of the year, 4 trillion yuan of investment will gradually stimulate steel consumption, which will help the steel industry get out of the trough as soon as possible.