Behind the drop in steel prices: Pressure from manufacturing and other manufacturing industries surged

The purchasing volume index had its first negative growth in the past five years, and the finished goods inventory index rose sharply to more than 50%.

In Feng Tianxiang's company yard, open-air yards are lined with neat rows of steel. On his desk, there are 3 faxes the customer has just sent. Three customers explicitly told Feng Tianxiang that they will not order in May. Plates.

Feng Tianxiang is the general manager of a steel trading company in Hebei. He also represents the products of four steel companies. A while ago, steel prices continued to rise, market demand has been sluggish, so that Feng Tianxiang frowned. "The volume of the sunrise has been reduced by 60%." Feng Tianxiang said in an interview with the author on April 14.

According to Feng Tianxiang, hot plate products currently sell at a loss of 200 to 300 yuan per ton, and the more they sell, the more they lose. However, the amount of inventory in the early period is too large. In order to reduce inventory pressure and return funds, even if it is lost, it will be sold. In addition, in order to maintain the relationship of some old customers, they also had to sell them some steel at a low price.

The pressure continued to accumulate, and Baosteel took the lead in cutting prices, cutting the price of cold-rolled products by 300 yuan per ton in May, and reducing the price of hot-rolled products by 200 yuan per ton.

Behind the downward adjustment of product prices by steel companies, there is a change in the purchasing managers' index. From the 11 sub-indexes of the purchasing managers index in March, compared with the previous month, the purchasing volume index, import index, and purchase price index fell. The purchasing volume index showed the first negative growth in the past five years, while the latter two indices fell. Nearly 2 percentage points; the rest of the index has risen, among which the finished goods inventory index has increased by more than 4 percentage points to more than 50%.

Some experts believe that the change in the purchasing manager's index reflects that this year's manufacturing industry is facing various difficulties such as rising raw material prices and increasing pressure on finished products.

Steel companies competing to cut prices, or sell it

After Baosteel's first reduction of steel prices in 9 months, other steel mills immediately followed suit.

On April 15th, Angang Steel issued a full reduction in the prices of steel products in May. Among them, cold rolled, galvanized, and color-coated products reduced the scope of their products so that the market “falls through the glasses,” and the cold-rolled product ex-factory price is reduced by 480 yuan per ton. , galvanized products are lowered by 350 yuan per ton, and color-coated products are lowered by 300 yuan per ton.

From the order point of view, the orders for steel mills were generally better in April, but some manufacturers' orders have started to decline. According to public reports, Baosteel's orders fell to 90% in April, and orders for the first three months of this year reached 100%.

An insider of a steel company in Shandong told the author that the company’s order situation was slightly better than Baotou Steel, but it also dropped more severely.

Ma Tengfei, a Beijing-based steel trader, told the author that the extent of price cuts by steel companies is not enough to stimulate the market, because the demand for downstream manufacturing has not risen and the purchase volume is hard to increase. If the situation in the manufacturing industry is good, even if steel companies do not lower their prices, the amount of procurement will be good.

Ma Tengfei said that the stock of steel stocks on the market is now more than 10% higher than the same period of last year, which will offset the benefits of steel price cuts.

Some analysts believe that the production of sheet steel mills to take price cuts, mainly because traders and downstream industry orders have shrunk, the current inventory pressure in steel mills is much higher than last year. Therefore, "This time, the steel mills have dropped prices sharply to reduce the extent of 'upside down' and to stimulate traders' order enthusiasm and ensure order quantity."

But traders "are not sympathetic."

Feng Tianxiang clearly told the author that the company had already made requests to the four steel companies that he represented to no longer pick up the goods because the company’s stock had already exceeded 10,000 tons, and the stocks were not digested and could not be sold.

According to Feng Tianxiang, traders of thin slabs had previously reduced their orders in March and April, and many traders were close to “zero-run” status.

In addition, customs statistics show that China’s export volume of thin sheet products also dropped sharply in February: China’s cold rolled product exports in February were 109,000 tons, a decrease of 27% compared with the previous month; in February, exports of galvanized products were 263,000 tons. The export of hot-dip galvanized products was 255,000 tons, a decrease of 11% from the previous month; in February, the export volume of color-coated products was 216,000 tons, a 34% decrease from the previous month.

The manufacturing industry has entered a downturn?

Prior to this round of price cuts, steel prices have risen continuously for nearly a year, and prices have risen to more than 4,500 yuan from the lowest 3,000 yuan in the international financial crisis.

An insider of a car company told the author that in the automobile production process, steel accounts for 60% to 70% of the total automobile consumables, and the steel prices have affected the profits of car companies to a large extent.

According to insiders of the above-mentioned auto makers, the company is very sensitive to the rise in steel prices. At the end of last year alone, the company’s cost per vehicle increased by several thousand yuan. The person in charge of the Yutong Bus Propaganda Department also told the author: “The rise in steel prices will definitely have an impact on costs and squeeze profit margins for car companies.”

"For car manufacturers, the price reduction of steel products is not of much practical significance, because car sales have fallen a lot, and the amount of steel purchases has also dropped. Raw material prices can only be absorbed by car companies themselves and cannot be passed on to consumers. Now the car prices are still not easy to sell it." The car company insiders told the author.

At present, BYD has announced that in March, 40027 vehicles were sold, which was a 51% year-on-year decrease but 41% year-on-year. In the first quarter, BYD sold nearly 120,000 vehicles, down 25% year-on-year.

The latest statistics released by the China Association of Automobile Manufacturers on April 10 showed that in the first quarter of this year, domestic cars produced and sold 4.895 million and 4.983 million vehicles, an increase of 7.48% and 8.08% year-on-year, representing an increase of 69.51% from the same period of last year. 63.7%.

The home appliance industry is also deeply troubled. According to statistics, in the first two months of this year, the output of refrigerators, air conditioners and washing machines all fell sharply in the household appliance market in China.

In the first two months, China has produced 10.526 million household refrigerators, 9.721 million washing machines, and 20.731 million air conditioners. In February, production of household refrigerators fell by 1,209,900 units compared with January. Compared with the same period of last year, the increase rate quickly dropped from 25.33% to 4.2%. The washing machine production is also facing the same situation. The entire February production just over 4 million units, a decline of 25.95% compared with January production, compared with an increase of only 3.3% over the same period last year.

The latest data released by China Investment Securities show that from January to February, the total sales volume of black power industry decreased by 1.5% year-on-year, mainly due to the sharp decrease in domestic demand, and the sales growth of domestic brands continued to slump.

Some analysts believe that “the state’s policy of suppressing the real estate industry will also be transmitted to the household appliances and automobile industries, ultimately affecting the demand for sheet metal products.”

An expert from the Development Research Center of the State Council who declined to be named indicated to the writer that since the "Twelfth Five-Year Plan" was promulgated, the state has made frequent macro-control adjustments, mainly to adjust the structure. Some steel industry production growth has slowed down and product demand has weakened. Demand for raw materials such as steel has shown signs of weakening.

“In addition, the central bank raised reserve funds and raised interest rates several times since the fourth quarter of last year, making it more difficult for end-use steel companies to raise financing and rising costs, which will directly affect their purchase of raw materials such as steel,” said the expert.

Experts: Get Rid of Policy Dependence

In an interview with the author, the person in charge of the China Automotive Industry Association stated that the decline in automobile sales was mainly due to the withdrawal of the three preferential policies of purchase tax, automobile to the countryside, and vehicle replacement.

The person in charge believes that the auto market is facing many uncertainties this year. Last year, the auto market still had policies such as saving energy and benefiting the people, and many good policies were basically cancelled this year. This will directly affect the profits of car companies this year.

In addition, due to the state's regulation of real estate, home appliance companies are feeling chilly. Sun Liang, an internal researcher in a household electrical appliance company, said: "The pressure on the company this year is very large. The country's control of the real estate industry, the property market downturn, will certainly affect the sales of kitchen appliances."

Yang Dongwen, vice president of Skyworth Group and president of the color TV business division, had publicly stated that the real estate situation was in poor condition and TV sales were affected.

According to experts from the Development Research Center of the State Council mentioned above, these industries rely too much on this kind of temporary "subsidy" policy, and they will be "precautionary" if the policy changes.

Feng Tianxiang said: “Last year's downstream manufacturing companies used a very large amount of steel, which was mainly affected by the policy and spurred the consumer market. It was equivalent to pre-paying the market ahead of schedule. Now that the policy has been cancelled, the market demand is not so great. We will also It's bad."

The “Twelfth Five-Year Plan” puts forward: “Optimize the structure, improve the quality of varieties, enhance the supporting capabilities of industries, eliminate backward production capacity, develop advanced equipment manufacturing, adjust and optimize the raw material industry, transform and upgrade the consumer goods industry, and promote the manufacturing industry to become stronger and stronger.”

The experts from the Development and Research Center of the State Council mentioned that the temporary policy of “smart medicine” alone cannot help the manufacturing industry become bigger and stronger. Now that the manufacturing industry is facing a situation in which the market demand is not strong, it is inevitable to adjust the structure. It is thinking about going to "policies" to solve temporary problems.