Steel Market Trends in 2014: Declining Rapidly Decreased Probability
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In 2013, the domestic steel market ended in a somewhat stable state. In 2014, what will happen to the domestic steel market? In this regard, Xiao Bian collected some data and provided a pulse for the 2014 market trend in terms of supply and demand, cost, and macroeconomics.
The industry's main point of view is that under the backdrop of the overall favorable environment, the domestic steel market will continue to fluctuate frequently in the game of demand, supply, and cost in 2014, and the probability of rapid rises and falls will become smaller and smaller.
Analyst Wu Wu believes that the overall domestic steel market situation in 2014 will generally be better than in 2013. The domestic steel market price is expected to fluctuate and rebound in the first quarter of 2014. In the second quarter, the market will enter the stage of digesting inventories. The price is expected to fluctuate and the domestic steel market will show a “weak balance†operating trend. Zhou Guocheng, another analyst, predicts that steel prices will be low and high in 2014. Prices will be higher in the second half than in the first half of the year, and price fluctuations will be smaller than in 2013.
When the salespersons of steel mills change their prices in the short term, they think it is difficult to make qualitative changes. Assistant Min Li, general manager of Qianjiang Jiujiang Wire & Cable Co., Ltd., believes that although due to environmental pressures, production in Hebei is still not enough. In the short term, the impact on the market is limited, and there is no obvious decline in output. The demand will gradually decrease during the festival. The willingness of Shangdong Chu is not strong. It is expected that overall prices will be weak in January, and there will be a wave of upswing from March. Du Kelin, head of the hot rolling sales department of Wuhan Iron & Steel Marketing Corporation, believes that due to rising costs, prices are expected to rise steadily in the short term, but due to no change in the general environment, prices will stabilize in the short term and there will be no qualitative changes.
Supply exceeds demand will not change From the perspective of supply, based on the continuous warming of environmental pressure and resolve the continuous progress in overcapacity, it is expected that the growth of China's steel production will slow down in 2014. However, due to the huge production capacity base, the supply pressure facing the steel market is still extremely serious.
Wu Wenjun and Zhou Guocheng both believe that China's crude steel production in 2014 will reach 800 million tons. In 2013, China’s new steel production capacity was 73.88 million tons, reaching 1.07 billion tons, and the capacity utilization rate is expected to be 75.2%. It is expected that the new steel production capacity will reach 49.37 million tons in 2014, and the total volume will increase to 1.12 billion tons. The capacity utilization rate is approximately 72.8%. From 2013 to 2014, among the 120 million tons of newly added steel production capacity, 90,000 tons of new long steel production capacity, total production capacity increased to 650 million tons; new sheet production capacity was 25.1 million tons, and production capacity of hot rolled coil increased To 252 million tons, the plate production capacity increased to 92.7 million tons. Even taking into account the phase-out of steel production capacity in 2013 and 2104, it is expected that by the end of 2014, China’s steel production capacity will reach 1.1 billion tons. According to the capacity utilization rate of 75% to 80%, China's crude steel production is expected to be about 800 million tons in 2014, which is an increase of 2.6% from 2013.
From the perspective of demand, with the steady progress of China's economy and the gradual development of new urbanization, it is expected that China's steel demand will increase steadily in 2014. However, given that the downstream industry is also in a critical period of structural adjustment, this does not mean that demand will show explosive growth.
Wu Wu believes that from 2001 to 2012, China’s crude steel consumption per 10,000 yuan GDP (gross domestic product) and the consumption of crude steel for fixed assets investment per 10,000 yuan continued to decline. In 2013, China’s crude steel consumption per 10,000 yuan GDP was 129 kg, which is expected to fall to 121 kg in 2014. In 2013, crude steel consumption per 10,000 yuan in fixed assets investment was 162 kg, which is expected to decline to 142 kg in 2014. Therefore, there will be no significant increase in demand for the domestic steel market in 2014.
From this, it can be concluded that the increase in steel supply in 2014 will still be greater than the actual demand, and the pattern of supply oversupply will not change.
The high cost will still exist From the perspective of the raw material market, the pattern of iron ore supply exceeding supply is shifting towards oversupply. On the one hand, as the growth of China's steel production declines, the demand for iron ore has also entered a low growth trend. On the other hand, not only the global mining giants are sparing no effort to expand production, and domestic mine production has also steadily increased in recent years. The supply of ore is getting more and more full.
But even so, the possibility of a sharp drop in iron ore prices in 2014 is still small. Because based on the huge production capacity base of the steel industry, the demand for raw materials can not be substantially reduced. Wu Wu believes that China’s dependence on iron ore imports remains high. In general, the iron ore price in the first half of 2014 was hard to fall below US$110/ton, and the main price range was from US$120/ton to US$140/ton.
In 2013, China's imported coking coal increased significantly. In the fourth quarter, the international coking coal market price stopped falling and picked up slightly. It is expected that the annual average domestic and international coking coal and coke market prices in 2014 will be slightly higher than 2013.
Therefore, the high cost situation will hardly be effectively improved in 2014. The higher production costs, to a large extent, determine that the market price in 2014 could not be significantly reduced, and it is expected to continue to maintain fluctuations in the price level in 2013.
Overall domestic and international environment stability Judging from the domestic environment, Zhou Guocheng believes that China's economy will maintain steady growth in 2014, and the growth of investment in fixed assets, especially investment in infrastructure construction, will become the main driving force for the growth of steel demand. However, given that adjusting the economic structure and transforming the mode of development will be the subject of China’s economic growth for a long period of time in the future, the probability of the introduction of large-scale economic stimulus policies will be small. For the steel industry, resolving excess capacity will be the main adjustment direction in 2014.
Wu Wu believes that the market risk caused by bank-limited loans in 2013 has not been completely eliminated. The number and scale of steel circulation enterprises are still in a stage of substantial reduction. The steel circulation market is short of capital and transactions are depressing, and the function of the "reservoir" is weakened. With the rapid development of informatization and logistics and transportation industry, commodity e-commerce is in the ascendant. Processing shear distribution centers and e-commerce will shorten the flow of steel circulation, and at the same time create conditions for the efficient and direct delivery of terminals and precise distribution of steel production and trade circulation enterprises in the future. .
From the perspective of the foreign environment, the global economy generally tends to improve. However, some emerging economies have a greater downward pressure, weakening growth kinetic energy, and prominent structural conflicts, which may become uncertain factors for the world economy in 2014. In this context, it is expected that imports and exports will grow steadily in 2014. Wu’s article predicts that China’s net exports in 2014 will be 50 million tons or slightly higher.