Infrastructure drives steel industry to speed up production again in the summer of 2020

On September 15, statistics from the National Bureau of Statistics showed that in August 2020, China's crude steel average daily output of 3.0597 million tons, new record high, pig iron average daily output of 2.5339 million tons, steel average daily output of 3.8429 million tons. In August, China's steel output reached 11.13 million tons, up 11.3 percent year on year.

At the same time, the price index showed that as of September 18, steel price index reached 3,940 points. The steel index has hovered above 3,900 since the start of August and is at its highest level since February.

Lange Steel network through the calculation that the national crude steel apparent consumption in August reached 94.21 million tons, a year-on-year increase of 13.4%, such a growth momentum is not not strong.

Steel is an important material for infrastructure construction and real estate construction, as well as one of the basic raw materials for industrial manufacturing. Behind the strong consumption of steel is China's further good performance in fixed investment and industrial manufacturing.

Another concern is the performance of steel imports and exports. Steel industry analysts believe that the current price difference between steel imports and exports, as well as the significant change in the size of steel imports and exports, together from the side reflects the recovery of China's economy to the demand for steel.

Strong consumption of steel

Lange steel network analyst Chen Kexin analysis thinks, after entering the demand season, steel domestic consumption continues to speed up. According to the agency's statistical data, the apparent consumption of crude steel in China from January to August this year was about 663.24 million tons (excluding imported billets and rough forgings, the same below), an increase of 6.1% over the same period last year and 1.1 percentage points higher than that from January to July this year. The apparent consumption of crude steel in August reached 94.21 million tons, up 13.4% year on year, with a particularly strong growth momentum.

Wang Guoqing, director of Lange Steel Research Center, told The Economic Observer website on Sept. 18 that apparent consumption is a measure of domestic steel consumption, which is generally estimated by adding output to imports and subtracting exports. In the total production of steel, export means to go overseas, import is used for domestic steel consumption, there is inventory in the middle, but because the inventory is dynamic and the range of change is relatively small, generally not considered.

Chen Kexin further analyzed that the apparent consumption of crude steel increased significantly in August, which can be evidenced from the following aspects: First, the domestic output reached a new high. Statistics show that the national crude steel output in August 2020 is 94.85 million tons, with a year-on-year growth of 8.4%. Second, imports have been more rapid. In August, China imported 2.24 million tons of steel, up 129.9% year on year. In August, China exported 3.678 million tons of steel, down 55.3 percent year on year, a further decline that actually means more steel is being shifted to domestic consumption.

Steel consumption is closely related to infrastructure, real estate and manufacturing. Some data indicators show that behind the high growth of steel consumption data, and solid investment and the whole industrial sector to further show a good synchronization.

From January to August, fixed asset investment (excluding rural households) fell by 0.3% year on year, a 1.3 percentage point decline narrower than that from January to July. In August, fixed asset investment (excluding rural households) increased by 4.18% month-on-month. In August, the value added of industrial enterprises above designated size increased by 5.6% year on year, 0.8 percentage point faster than the previous month and close to the average of the previous year.

Among them, most of the products and industries to achieve growth, growth continues to expand. In terms of products, in August, among 612 major industrial products, 394 products achieved year-on-year growth of 64.4%, representing a further increase compared with the previous month. In terms of industry segments, 29 of the 41 industrial categories saw growth, 4 more than last month, with a growth rate of 70.7%. From January to August, 247 products achieved year-on-year growth, 32 more than that from January to July. Sixteen industries achieved growth, four more than in January-July, and the growth area continued to expand.

Important steel consumption industry indicators further improved this month. Data from the National Bureau of Statistics showed that among the output of major steel-consuming products, 2,088,000 automobiles were produced in August, up 7.6% year-on-year. Metal-cutting machine tools increased by 11.8% year-on-year, industrial robots by 32.5% and generating units (power generation equipment) by 14.4%. Other such as construction machinery, electrical machinery and equipment, computers, communications and other electronic equipment also have a substantial growth, year-on-year growth of more than 8%.

Moreover, leading indicators such as China's purchasing managers' index and excavators continue to improve, while market participants such as steel mills and traders continue to remain optimistic or cautiously optimistic, Chen said. Superimposed domestic and international monetary easing environment, a number of factors together to promote China's steel domestic consumption speed up.

China's manufacturing purchasing managers' index (PMI) stood at 51.0 percent in August, down 0.1 percentage points from the previous month, according to the National Bureau of Statistics (NBS), indicating that the manufacturing sector was generally running smoothly.

In addition, according to the statistics of China Construction Machinery Industry Association, a total of 20,939 mining machinery products were sold in China in August 2020, with a year-on-year growth of 51.3%. Among them, the sales volume in the domestic market reached 18,076 units, with a year-on-year growth of 56.3%.

Change of import and export

China's steel imports and exports continued to decline year-on-year in August, while imports grew at a super high speed, customs import and export data showed.

To be specific, in August 2020, China exported 3.678 million tons of steel, a year-on-year decline of 26.5%. From January to August, China exported 36.5557 million tons of steel, a year-on-year decline of 18.6%.

China imported 224.0 million tons of steel during the same period, a year-on-year increase of 130%, China's cumulative imports of steel from January to August 12.189 million tons, a year-on-year increase of 59.6%. China's imports of steel jumped 210% in January from a year earlier, a 10-year high.

July has been implemented for imported high growth, it is thought that high mainly because of the domestic steel imports innovation under the full return to work and production, the steady rise of demand, steel prices rise, there is wide, and steel prices fell sharply due to weak demand in abroad, spreads further expanding both at home and abroad, domestic big influx of cheap resources.

The personage inside course of study to the economic observer analysis says: for a long time, precisely, in recent ten years, the advantage of China's iron and steel industry is very obvious, steel prices are often lower than the international market, so China can be a large number of exports of steel products, by contrast, foreign steel competitiveness is weak, accordingly to export to China was more difficult, in addition to have to import some and bring in some foreign supply chain of steel products, steel overseas competitiveness is weak, because the price remains essentially a month 1 million tons and imports.

But the epidemic has reversed China's steel import and export situation and domestic and international steel price advantage.

"The overseas epidemic has not been well controlled and the economy has been greatly impacted, which has caused the overseas steel demand to stall in the past few months. The steel price abroad has dropped to the floor price, which has formed a very strong price attraction for China. Domestic traders and steel mills have been scrambling to sign a batch of import contracts in recent months." The personage inside course of study analyzes to say.

The personage inside course of study thinks, the current China imported more than 200 ten thousand tons of steel a month, if coupled with the more than 200 ten thousand tonnes of steel, the import is as high as more than 500, ten thousand tons, the quantity is "abnormal", investigate its reason, or the decline of the overseas economic due to the short term, steel demand sharp contraction, cause the price is too low, so as to enter the Chinese market.

However, he expects the price advantage to narrow as overseas steel prices recover, so he expects Chinese steel imports to fall quickly and eventually recover to around 1m tonnes a month.

According to data provided to the Economic Observer by Lange Steel, the average price of steel imported from China was higher than the average price of steel exported from China until May 2020. However, this situation has been reversed since May 2020, when the price of steel exported from China exceeded the price of steel imported.

Wang Guoqing to the Economic Observer analysis that the current low prices of overseas resources, created the current surge in imports. In fact, the reversal of the price difference between imports and exports, as well as the significant change in the pattern of imports and exports, together from the side reflects the accelerated recovery of China's economic demand for steel.