Prospect Analysis of China's Steel Industry in 2013

With the arrival of the new leadership team, experts believe that the steel market in 2013 is expected to usher in dawn.

1. Demand Side Infrastructure Construction: Under the steady growth of macroeconomic policy, railway investment is still a quality investment project. The Ministry of Railways decided at an internal mid-level and high-level meeting held recently that the investment in railway infrastructure in 2013 will not be lower than the level in 2012 and will remain at more than RMB 520 billion. It is still mainly invested in high-speed rail projects and coal transportation that have already started construction. Channel project. Since the acceleration of this round of railway construction is in line with the steady growth of the central government's macro-control ideas, the follow-up of the Ministry of Railways and the issuance of railway bonds will also be supported by the central government. The demand for railway steel such as heavy rails and light rails will therefore be met. There will be a clear recovery.

Real estate: After the “price-for-money” promotion in 2012, the financial strains of most developers have been significantly eased, and land reserves and stocks of commercial housing have sharply decreased, and sentiment has become more optimistic. This, combined with local government’s reliance on land finance, has resulted in The land market is expected to maintain a certain degree of heat in 2013. The compilation of the “Twelfth Five-Year Plan” for the real estate industry is accelerating. The introduction of the real estate tax policy will be incorporated into the 12th Five-Year Plan of Real Estate. It can be seen that curbing speculative housing purchases will become a long-term policy for the regulation of the property market in the future. Therefore, the regulation of the housing market will not be relaxed in 2013, but it is unlikely that there will be continuous tightening.

Machinery industry: Due to the obvious stimulatory effects of previous policies in industries such as automobiles and home appliances, resulting in excessive overdrafts, and the effects of energy-saving and people-friendly policies are not obvious, it is unlikely that there will be significant recovery in 2013, and the growth in demand for steel is limited.

2. Supply side The once-exorbited industry in the steel industry has now gone from a profit of 20% to the margin of loss. Although the state has repeatedly regulated the steel industry, the problems of redundant construction and overcapacity have plagued domestic steel companies. According to Fubao statistics, there are still more new blast furnaces in 2012, of which long products and cold-rolled products account for a large proportion. On September 3, 2012, the Ministry of Industry and Information Technology of the People's Republic of China announced the new “Regulations for Steel Industry Regulations 2012”, which is hereinafter referred to as the “Regulatory Conditions”, and re-determines steel company standards that meet the conditions for entry and meet the new access requirements of the company. The annual output of crude steel should reach 1 million tons and above; special steel enterprises should reach 300,000 tons and above, and the ratio of alloy steel is greater than 60%. However, due to the cancellation of the previous regulations concerning the approval of documents by the Ministry of Industry and Information Technology in the new version of the "Regulatory Conditions," the original projects that had not been approved for production capacity control were reopened, which implied risk and saved the market's effectiveness. In addition, because steel production is the main source of local taxes, some local governments are also blind to this. On the whole, in 2013, the fact that China's steel industry will continue to face the pressure of overcapacity is beyond doubt.

3. Costs China's consumption of iron ore has far exceeded the sum of the rest of the world and is the most important force affecting the world iron ore market. However, iron ore, as the most important raw material component of steel, is closely related to economic conditions. The slowdown in China's economic growth has become an established fact. It remains to be seen how the foreign crisis will be resolved. In terms of demand, the profits of the industry are meager. Under the current situation, there was no clear release of demand in 2013 in China. It can be seen that the iron ore pressure is still heavy and the center of gravity may continue to move downwards. The prospects of Chinese enterprises' demand for Chinese minerals remain more optimistic and their destocking cycle has ended. This provides support for the iron ore price benchmark level. It is expected that the downward adjustment will be unlikely and will return to a reasonable level.

4. Market sentiment Markets, some of which are relatively optimistic about the 2013 market, believe that the new government may increase government investment to promote urbanization, service industries, and regional development. This will have a modest positive impact on China's economic growth. And the iron and steel industry has gradually attracted attention in the "era of low profit" and is closely related to the operation of the economy. Some are still not optimistic and believe that the downturn will continue. Mainly because of the global economic downturn, the European debt crisis has not receded, the Chinese government continues to suppress real estate, export trade is difficult to improve, domestic consumption is limited; steel production capacity is still excessive, capital chain tensions are difficult, etc. The cold winter of the steel industry still needs to undergo long adjustments. Some of them expressed their confusion and thought that the late-stage policy was unclear and they intended to follow the market.

In summary, in 2013, the global economy was still in a period of adjustment after the crisis, and the international environment was full of complexity and uncertainty; while the domestic economic operation was in the process of seeking a new balance, or maintaining a moderate growth rate, it would have an impact on the steel industry. A certain amount of positive influence. Although the supply side has the constraint of overcapacity and stubborn disease, and the demand side has speeded up the construction of railways, the real estate control policy will not continue to loosen, but it is unlikely that the tightening will continue. The total demand is expected to increase. Therefore, it is expected that the operation of the steel industry in 2013 is expected to turn dangerous. The average price level is expected to increase compared with 2012. However, due to the fact that the cost center of gravity is expected to move downwards, it is difficult to see a sustained and better market.