Steel industry will grow steadily in 2007

Nearly 2007, the basic situation of the steel price trend this year has been determined. If there are no accidents, the price of steel products will rise and fall in a few years will come to an end this year and enter a steady growth period. Different economic development prospects will not necessarily bring about. The price trend. In the past four years, China’s macroeconomic growth has maintained its double-digit growth, attracting worldwide attention. However, as the series of economic and social structural contradictions brought about by the rapid economic growth has become increasingly prominent, the Chinese economy has or must be transformed from high-speed growth. In order to solve the current problems of environmental protection and energy, it is necessary to enter a stage of steady growth. Therefore, for the steel industry in 2007, it is definitely a turning point. The trend of steel prices will inevitably be affected by the influence of the big climate.

Analysis of Macro Changes in 2007

1. Economic growth drives the consumption of steel products.The Chinese Academy of Social Sciences and other domestic and international agencies predict that in 2007, China's GDP growth rate will maintain about 10%, fixed assets investment will increase by more than 20%, total import and export trade will increase by 20%, and monetary and financial To maintain a dual-steady policy, the pressure for appreciation of the renminbi remains, and in addition, the country implements an “active employment policy” and widens the job market, which will help improve the income and consumption levels of urban and rural residents and further promote the upgrading of the consumption structure. To maintain rapid growth, the market demand for steel remains strong, so there will not be a substantial decline.The global economic growth rate fell, but still a relatively high growth year. Since 2002, the world economy has begun to recover and entered an upward cycle. The global economic growth rate was 4.3% in 2005. The International Monetary Fund predicts that the growth rate will reach 5.1% in 2006, a new high in recent years, and the growth rate will be 4.9% in 2007, becoming the second highest growth year since the 21st century. The market demand is strong, and steel consumption remains at a high level. The International Steel Association predicted at a conference held in Argentina in September: Global steel consumption in 2007 It will reach 1.179 billion tons, up 5% of which: China's steel consumption of 374 million tons in 2006 increased to 413 million tons (net of repeated material), an increase of 10.43%.

2. The contradiction between the upgrade of steel consumption and the lack of high ratio of sheet metal to strip material is outstanding. The goal of structural adjustment of China's iron and steel industry in the “Iron and Steel Industry Development Policy” is very clear. The goal of product structure adjustment is to reduce the proportion of long products and increase the proportion of sheet and strip; to increase production concentration, to promote the formation of large-scale iron and steel enterprises; and to adjust the technical equipment . It is to eliminate small-scale steelmaking and ironmaking equipment. Specifically, the specific weight of wire rods, rebars, bars, and shaped steels will be reduced, and the proportion of hot-rolled steel sheets, cold-rolled steel sheets, galvanized steel sheets, and coated steel sheets will be increased. By 2010, the proportion of sheet metals will reach 50%. Because China still has 20-30 million tons of plate strip imports per year, while the proportion of strips in developed countries reaches 60%, and China's current strip ratio is less than 40%. In 2005, China's long products still accounted for more than 52% of total steel production. In 2006, the proportion of domestic long products will exceed 50%.

This is because there is a very close relationship between the growth of steel production in China and the growth of the construction industry. In China’s total investment over the years, investment in construction projects has always accounted for more than 60%, the highest year reached 70% -75%, which is the main reason for determining the structure of China's steel demand, but also a major factor affecting the rise in the proportion of sheet and strip. . In addition, about 23%-25% of the total investment in technical equipment investment, about 65%-70% of the electromechanical equipment is bound to import, this part of the machinery and equipment used steel can not be replaced with domestic steel, which also restricts China Steel product structure adjustment progress.

3. The degree of industry concentration has further increased. Hu Chunli analyzes the factors affecting the concentration of the steel industry: According to the “Iron and Steel Industry Development Policy”, by 2010, the number of iron and steel enterprises will be significantly reduced, and the output of the top ten domestic steel companies will account for the total national steel output. More than 50% will reach 70% by 2020.

In 2004, the output of the top 10 iron and steel enterprises in China accounted for 34.7% of the total, fell to 33.6% in 2005, and 34.1% in the first eight months of this year, and there has been no change in concentration. The reason for this is that there are not many cases of mergers and acquisitions between steel companies, and the number of companies that have already been merged is small; the restructuring of large steel companies has been slow; the economic growth of local governments has been motivated and the role of management and fiscal and taxation systems has played a role; Various local governments are faced with enormous pressures on economic growth. Industrial output is the main symbol of local government economic growth. Corporate taxation is the main source of local government financial resources; the distribution of benefits, value of taxation, and ownership of acquired enterprises, as well as personnel arrangements and history. Debt processing and other issues determine whether mergers and acquisitions can proceed smoothly.

4, backward production capacity is difficult to eliminate. He said that the "Iron and Steel Industry Development Policy" clearly improves the access conditions, and the technical indicators that must be reached by enterprises newly entering the iron and steel industry: a blast furnace volume of 1,000 cubic meters, a converter capacity of over 120 tons, and an electric furnace capacity of over 70 tons. A blast furnace with a capacity of 300 cubic meters or less, a converter with a capacity of 20 tons or less and an electric furnace with a capacity of 20 tons or less will be eliminated. In the future, backward ironmaking capacity of 100 million tons will be eliminated, and backward steelmaking capacity will be eliminated by 55 million tons. However, the difficulties encountered in the elimination of backward production capacity are mainly due to the fact that some small steelmaking and small rolling mills can survive. Because they mainly produce structural steels with low technological content such as rebars and wire rods, the equipment and processes are not complicated. Once the market is getting better, these small steel companies can be re-run.

Prospects of Steel Market in 2007

1. The iron and steel industry is still in a growth period, but its growth rate will fall as the economy cools down.In 2006, China's steel production has seen a trend of declining growth rate.The decline in production growth has its inevitability and rationality.Preliminary forecast: 2007 Crude steel production increased by about 11%, while steel production increased by about 11%.The apparent consumption of crude steel in the domestic market increased steadily. In 2007, if the investment growth rate was 20%, the investment and consumption of crude steel would drop to 3232 tons. In the domestic market, the apparent consumption of crude steel grew by 11%.If the apparent consumption of steel products (including duplicating materials) is estimated, the apparent consumption in the domestic market could reach 492 million tons, an increase of 13% in 2007. The steel consumption intensity will not be significantly weakened. But except for individual varieties.

2, iron ore prices will rise slightly. Although major domestic iron and steel production enterprises have loudly called for price cuts for iron ore in 2007, judging from current information in various aspects, international iron ore prices are unlikely to fall, and may even increase slightly. Because the exchange rate of the renminbi has continued to rise this year, it has basically appreciated about 5%. In the iron ore negotiations in 2007, exchange rate changes will inevitably become an important reason for fare increase, and this year, domestic and international, steel production companies are both prosperous and prosperous. The contract is full.

3.Steel imports basically remained stable, and steel exports showed a downward trend.In 2007, due to the deceleration of domestic steel production growth, the lagging effect of export tax rebate rate reduction, and the rise of steel trade protectionism, China's steel and billet exports will decline. It is estimated that the net export of steel and steel billets will be around 15 million tons for the whole year, a decrease of about 10 million tons, and steel imports will be around 18 million tons, which will basically maintain the level of 2006.

4. In the international market, the price of steel remains high, and the domestic market price level will still be lower than the international market.According to the prediction of the International Steel Association, in 2007, under the premise that the global economy continues to maintain high growth, the supply and demand relations in the global steel market are basically balanced. There will be a serious oversupply situation, as steel production and manufacturing costs (mainly energy, raw materials , labor costs, and environmental protection fees) will not drop significantly, which will support global steel prices to maintain high levels and will not continue to drop sharply. From a recent point of view, as China's export tax rebate adjustments have led to a steady rebound in the prices of international steel prices, especially primary products.