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The country’s 4 trillion investment will drive the demand for infrastructure steel, but large steel users such as real estate and automobiles may experience a year-on-year decline. Taken together, from the macroeconomic and downstream industry forecasts, China's crude steel consumption may be 460 million to 470 million tons next year, and downstream demand is expected to rebound from the second quarter.
Supply: Capacity utilization determines iron and steel output next year From January to October 2008, China produced a total of 427 million tons of crude steel and 488 million tons of steel (including repetitive materials), which were 3.9% and 5.9% higher than the same period of last year, far lower than the beginning of the year. Expected growth of %. From a monthly output point of view, the domestic crude steel output growth rate began to decline in August and showed a negative growth. Compared with the production peak in June, the crude steel output in October decreased by 24%. This is obviously due to the sluggish demand leading to the steel price plummet, the steel mills are forced to cut production or even stop production. Since October, more than 30 steel companies headed by Hebei Iron & Steel Group have announced production cuts at different levels, and even a large number of privately-owned small steel enterprises in Hebei and Henan Province have stopped production. Even steel giants such as Europe, the United States, Japan, and South Korea, which have high industrial concentration and strong pricing power, can still not escape the trend of decline in overall demand caused by the economic crisis. The reduction in production whirlwind has swept the global steel industry.
Although the growth rate of crude steel production has slowed down significantly, steel investment in fixed assets has maintained rapid growth. Even though investment growth in October has declined, the total investment in fixed assets completed in the first 10 months still increased by 26% year-on-year. This is due to the fact that the increase in industry profits and the reorganization of industries since 2007 has stimulated new investment, on the other hand, it has also resulted from the upgrading of industrial structure and the increase in investment in ton steel. However, taking into account the deteriorating profitability of steel enterprises in the second half of the year and the tightness of funds, some projects have begun to postpone construction. It is expected that the growth rate of industry investment in the next year is expected to fall back to around 5%.
In recent years, major domestic steel projects have been launched frequently. The Bayuquan and Caofeidian projects have been successively put into operation. Zhanjiang and Fangchenggang projects have been started one after another. Ten million tons of sunshine projects are under development. Therefore, it is expected that China's steel production capacity will remain 25 million to 3500 per year over the next two years. Ten thousand tons of growth. However, due to the constraints of demand, the growth rate of crude steel production will be significantly slowed, and the capacity utilization rate of the industry is expected to fall from the 2007 high to the 2004 level. The reduction in capacity utilization means potential supply pressure. However, compared with the continuous expansion of steel enterprises in 2004 that results in a decrease in capacity utilization, it is more likely that steel companies will automatically limit production and actively reduce capacity utilization in 2009.
In terms of sub-categories, thanks to the upgrading of product structure of steel enterprises and elimination of outdated production capacity in recent years, the production of sheet metal increased significantly, while that of long products did not increase substantially. From the point of putting the project into operation in 2009, new production capacity is also mainly concentrated in various types of plates. However, at present, the growth rate of major downstream users such as machinery, automobiles, shipbuilding, and household appliances in the plate industry are all declining, and the future prospects for medium-to-low plate materials are worrying. The construction of steel by the state to increase the intensity of infrastructure construction, the situation is relatively better. However, it should be noted that there are many private steel construction companies and the production line is easy to go back to work. With the fall in raw material prices and the recovery of demand, the recovery rate of production is also very fast. At present, some small and medium-sized steel enterprises that use spot production in Hebei have started to gradually resume production.
In general, although domestic steel supply pressure in 2009 was relatively large, the key issue was whether demand could recover.
According to the current production situation of the domestic steel industry, China's crude steel production in 2008 is expected to be approximately 497 million tons, a slight increase from 2007, and 2009 will be based on the recovery of downstream demand, and output growth may be 2%-4%. between.
Demand: Accelerating infrastructure construction The deceleration of PK real estate is affected by the deceleration of China's macro economy. After entering 2008, the downstream industries including fixed assets investment, real estate, automobiles, machinery, and household appliances all experienced a slowdown in growth rates. Since the third quarter, due to the transmission of the subprime mortgage crisis to the real economy, the operating pressure of the downstream industries has increased, demand has further contracted, and the consumption of crude steel has rapidly declined. At the moment when the market was worried about the demand situation in 2009, the Chinese government launched a heavy blow and introduced the “ten measures for expanding domestic demandâ€. It plans to invest 4 trillion yuan in “to promote stable and rapid economic growth†by the end of 2010. Then, can the government increase investment in infrastructure construction to offset the negative impact of the economic crisis on other industries and stimulate the overall recovery of steel demand?
According to the analysis of the country’s RMB 4 trillion capital investment, the major direction of pulling steel demand is mainly transportation construction such as railways and highways, post-disaster reconstruction, and affordable housing projects. From the perspective of steel demand structure, construction demand accounts for about half of the total demand, of which about 1/4 is needed for basic construction, and the proportion of steel for transportation industry is 5.5%. In other words, the demand for steel that can be directly driven by 4 trillion investment accounts for only about 20% of the total demand, while the rest of the demand needs to be boosted by the “ten measures†to stimulate domestic demand to drive the overall economy to warm up. It is also necessary to note that 4 trillion yuan is not all incremental investment, but is the result of increased investment on the basis of the 11th Five-Year Plan.
From a sector perspective, the fastest increase in demand for steel in 2009 should be in the transport sector. The Ministry of Communications and the Ministry of Railways proposed a five-year investment plan of RMB 5 trillion and a three-year investment plan of RMB 3.5 trillion, which is almost a transportation industry in 2008. The second is based on infrastructure investment. The second is incremental infrastructure. Thanks to post-disaster reconstruction and related national investments, the speed of infrastructure construction will inevitably accelerate. The demand for petroleum, petrochemical and marine industries will also increase significantly next year. This is mainly due to the construction of the second West-East Gas Pipeline and the centralized delivery of shipbuilding orders; while the downstream industries such as autos, home appliances, and light industry are greatly affected by the economic crisis, and there may be negative growth in demand next year, which is particularly worrying. Large steel demand, the real estate industry is difficult to see improvement, the sharp decline in demand is almost a foregone conclusion. Comprehensive Guotai Junan industry researcher forecast for the growth rate of various industries next year, China's crude steel consumption in 2009 is expected to be 464 million tons, a slight increase compared to 2008.
According to the forecast of Guotai Junan macro researcher, assuming that China's GDP growth rate in 2009 was 7%, through the fitting of the trend of unit GDP steel in recent years, we calculated the amount of steel used per unit of GDP in 2009, and finally calculated China's crude steel in 2009. The actual consumption is 469 million tons.
Combining the two prediction results, next year China's crude steel consumption may be 460 million to 470 million tons, and downstream demand is expected to rebound from the second quarter. Taking into account the impact of the global financial crisis, the economic needs of international entities have shrunk dramatically. Even if China abolishes some steel export tariffs, I am afraid it will be difficult to effectively stimulate export recovery. 2 In 2009, China's steel exports will remain at around 62 million tons.
2009 will not fall into the industry-wide losses According to the data released by the China Iron and Steel Association, the average steel-to-steel profits of key steel companies were still at a high of 591 yuan/ton in July 2008 and fell to 128 yuan/ton in September. The profit contracted by nearly 80% during the month. In October, it was the industry-wide loss that had not been seen for many years after the steel price plummeted. The performance in the fourth quarter was in jeopardy. Then, in the context of both domestic and international demand being affected by the subprime mortgage crisis and falling into a deep depression, and it is difficult to see any recovery in the short term, will the steel industry lose its full-year loss in 2009?
Looking back at history, we found that the first three low levels of profitability in the industry were 1998-1999 (Southeast Asian financial crisis), 2001.H2-2002.H1 (Internet bubble), and 2005.H2-2006.H1 (macro-control). Moreover, these three low points have gradually risen. We think this is in line with the overall upward trend of the global economy after 2000. From the perspective of the macroeconomic environment, the most comparable year in 2009 was in 1999. For this reason, we focused on examining the profitability of the industry in 1999: In the first quarter, the industry as a whole suffered a loss, but it showed a trend of improvement from the second quarter, and it followed the crisis in the second quarter. In the worst past, plus the gradual expansion of the fiscal policy implemented in the second half of 1998, the industry began to run out of losses and the average annual ton steel profit was RMB 34/t. We believe that the overall profitability of the industry in 2009 will be better than in 1999, and the possibility of a full-year loss will be minimal. The reasons are as follows: 1) The probability of the 4th quarter of 2008 becoming the bottom of the performance is greater, and it is expected to be consumed with high-priced stocks ( Assuming that steel companies did not artificially postpone the timing of high-priced raw materials in order to smooth performance, the first quarter of 2009 is expected to rebound from the previous quarter and achieve a break-even; 2) Central and local governments have successively disclosed huge fixed-asset investment plans since the fourth quarter of 2008. The stimuli for steel demand may emerge from the second half of 2009, that is, from the second quarter of 2009. Overall, the time and intensity of substantial improvement in downstream demand will directly determine the level of 2009 performance. Our preliminary forecast is that the 2009 ton steel profit will be between 2005 (292 yuan / ton) and 2001 (121 yuan / Ton) between.
In 2009, the utilization rate of steel production capacity will drop sharply and supply pressure will be greater. However, the key issue is whether demand can recover. It is estimated that China's crude steel production in 2008 will be about 497 million tons, and the output growth in 2009 may be between 2% and 4%.
December 03, 2023