2007 domestic steel market trend

At the end of 2006, domestic steel market prices tended to decline slightly, but the opposite steel stocks that represented market confidence rose steadily. The leading stocks of Baosteel stock prices doubled in a short period of time. The actual situation of the steel industry There is a divergence from the trend of related stock prices. In the upcoming 2007, what fundamental changes in the domestic steel market can have a profound effect on steel spot prices, which requires careful consideration and analysis.

1) Steady growth in steel consumption intensity

After entering the "Eleventh Five-Year Plan" period, the intensity of China's steel consumption will grow steadily, and the growth of market demand will be greatly reduced. Because of the "Eleventh Five-Year" development strategy set by the Chinese government, the dominant ideology is to change China's economic development through long-term dependence on resources and investment.

Since steel itself is also a resource, especially in steel production, which consumes a lot of energy and resources (including water), steel is also one of the resources to be compressed in the new strategy. Therefore, the quantity of steel needed by China for every one billion yuan of GDP will continue to decrease in the next few years or more than a decade, and the growth of domestic steel consumption will be greatly reduced.

In fact, China's current FAI contribution to GDP has exceeded the generally accepted reasonable range in the world, which has affected the stable development of China's economy. It has also caused the illusion that China's steel market demand is growing strongly.

As the proportion of FAI continues to increase, China’s domestic steel consumption has grown by an extraordinary amount, and the intensity of steel consumption has risen rapidly. According to the WSD analysis, the demand for steel for each one billion yuan GDP calculated at 1990 constant prices was 14,000 tons in China in 2000, and nearly 20,000 tons in 2003, and it is expected to exceed 20,000 tons in 2005. Such a large degree of steel consumption intensity only appeared in China's steel heat in 1992-1994, and the normal steel consumption intensity should be about 1.3-1.5 million tons. Even this "normal value" is more than six times higher than in the United States.

According to the analysis of research institutions, China’s steel consumption per 100 million yuan FAI is 14 times that of domestic steel consumption per 100 million yuan. If the proportion of domestic consumption rises at the same rate of GDP growth, the FAI will inevitably fall in the same proportion. However, due to the difference in steel consumption intensity between the two, the resulting reduction in steel consumption is obvious.

2) Increasing market confidence

For the current market, because the money-making effect of the steel trade this year is not very obvious, most of the companies engaged in steel trade are basically in a state of low profit. In the past, structural industrial profits caused by soaring steel prices have gone. Since 2006, with the gradual increase in the ability of steel mills and downstream users to grasp the market, the ex-factory price of steel mills has been higher than the market price at almost all times. In the current steel market, there are often gains and no gains. The phenomenon of merchants working for steel mills has caused current traders to adopt a cautious attitude toward the current trend of steel prices. Downstream users are wary of the ups and downs of steel prices. They are now minimizing their own inventory, and even achieving a “zero inventory”, adopting a procurement strategy that can be purchased on demand, resulting in almost all market risks. By traders to bear, so in 2006 the market confidence of traders in addition to the small rebound in the market price rebound in June and July, the rest of the month is basically more pessimistic.

However, with the approaching of 2007, the situation has changed. Generally speaking, according to economic laws, consumption peaks generally lag behind investment peaks for one to two years. Although the peak of investment will soon come to an end under the weight of central macroeconomic policies, the high growth economic investment will not disappear within one day. Low growth The absolute number of investment growth in the high base case is actually very impressive, and the consequent peak consumption of steel consumption is also worth the wait for the growth of steel consumption, but it should be noted that the steel consumption after the peak of consumption will inevitably be upgraded. The appearance of the phenomenon, that is, the original construction steel consumption will be upgraded to the main plate consumption, especially the high-end stainless steel, color coated board will have explosive growth.

In 2007, the change of governments in various parts of China was basically completed, and the investment enthusiasm of local governments will not decline. New projects will increase with the arrival of new officials. However, the intensity of steel consumption will grow steadily with investment upgrading, and traditional construction steel consumption will increase. Replaced by consumption of new construction steel such as H-shaped steel, the steel trade is encouraged by the news that the investment project will be restarted, and there is strong expectation for the steel market in 2007. On the one hand, it has not made much profit this year. On the other hand, the effect of macroeconomic regulation and control has already appeared at the beginning of 2007. Subsequent adjustment and control measures will basically not be introduced again, and the stability of macroeconomic stability will result in market confidence.

3) The operating tactics tend to be complicated

The traditional means of trade is nothing more than earning the difference between the selling and selling prices. In 2006, due to the relatively high level of marketization of steel mills' prices, generally the wholesale and retail price gap was controlled within a very low range, making traders who used to use large amounts of money feel The orders of the current steel mills are like chicken ribs. The food is tasteless and it is a shame to give up. Therefore, in an upside down situation, traders began to switch their own trading operation models and began to explore their own transformation. Traders with abundant funds are generally choosing steel mills to provide futures advancement services as a new business growth point, sharing the risk of regular steel orders from each month to other businesses, but also in the case of the completion of steel mills. , Earning differential allowances between various batches of purchases by steel mills to obtain almost no risk profits, which has almost become a common business model for some large steel trading companies.

For small and medium-sized traders, due to their own financial and strength deficiencies, it is not possible to operate this mode of advancement, but it is possible to use related electronic discs to conduct hedging and arbitrage operations to sell their inventory to electronic discs. But do not do one-way operation, according to the actual market conditions to design more than a single air ratio, lock the risk, timely changes in long and short single ratio, so that the use of the difference between the price changes between the electronic market and the spot market for a profit operation mode, also It is an innovation.

In recent years, the steel mills have been vigorously expanding their export and direct supply sales business, and are also in a gradual mode transition process. They have extended downstream and expanded their share of the steel industry chain. Therefore, steel mills are striving to develop direct supply and export businesses. In order to benefit from the downstream, according to the current situation, the growth of export business will not be very good next year, but direct supply business still has a lot of room for development, skipping intermediate traders directly, and relying on its own source pricing advantages and scale. Advantages Occupy the market. From the perspective of the market in 2006, steel mills have begun to exert pressure on direct supply. In 2007, the forces of the various parties in the steel market interacted with each other, and competition and cooperation have taken shape.

Conclusion:

In 2007, the steel market's macroscopic support for steel consumption has weakened, but the consumption support for steel consumption has gradually increased, and the basic steel consumption also has a trend of consumption upgrading, that is, the traditional wire thread consumption will dominate gradually. Since it has become an era dominated by sheet metal consumption, there is a huge opportunity in the steel market in 2007. Under the premise of increasing market confidence, grasping opportunities and taking advantage of the situation will surely become the operational purpose of traders in 2007. In the new year, under new opportunities, regardless of how steel mills, traders and downstream users choose their own operating mode, it is necessary to make a right choice based on their own actual conditions.