Domestic steel demand will gradually decline this year, steel companies will continue to operate low-profit

During the 4th China Steel Logistics Cooperation Forum held on January 8, the participating steel mills, associations, analysts and other people predicted the steel market in 2011. It is generally believed that the growth rate of steel demand in 2011 will fall, but Steel production capacity is still large, and ore prices will continue to rise in the short term, so steel companies will continue to operate at low margins.

Yan Gang, CEO of Xiben Shinkansen Co., Ltd. pointed out that the uncertainty of China's domestic demand increased in 2011. Judging from the strength and duration of the current macro financial policy, the demand for steel in real estate will be shrinking in a short period of time. It is the reorganization of the local financing platform and the “12th Five-Year Plan”. Resolutely prevent the use of the "Twelfth Five-Year Plan" period to blindly spread the stalls and the project, which is equivalent to suppressing the steel demand driven by a considerable amount of infrastructure construction investment.

Zhou Tao, deputy director of Qilu Securities Co., Ltd., believes that due to the moderate recovery of internal and external demand, steel demand in 2011 will not appear high-speed growth before 2008, and steel demand growth will gradually slow down. “In 2010 and 2011, China's steel demand was about 614 million tons and 657 million tons, up 9.0% and 7.0% year-on-year respectively.”

Although the growth rate of steel demand will fall, domestic steel production capacity is still large, and steel production capacity is overcapacity. Zhou Tao pointed out that although the government department said that it will no longer approve and approve projects to expand production capacity during the year, considering the two-year investment cycle of the steel industry, there will still be a release of previously approved capacity in 2011. It is estimated that the new iron-making capacity will be about the whole year. It is 70 million tons. All of the above factors will restrict the rising space of steel prices.

Yansteel expects that the domestic steel market will generally fluctuate around the average cost of the industry in 2011, and the overall price level will be higher than 2010. In terms of specific operational rhythm, in view of the relatively low level of domestic steel inventory at the end of 2010, and the winter storage cost of merchants is significantly higher than that of the same period of the previous year, after the Spring Festival of 2011, due to the “incremental inertia after hoarding” and “relatively loose after the Spring Festival” The domestic steel market may usher in a wave of bullish market.

At the same time, given the objective existence of uncertainty in the demand side and the lucrative factors in steel production in the current environment, supply pressure will gradually force steel prices to stop rising and then fall back. Therefore, the steel price in 2011 first rose and then fell, but the increase was limited, but the decline is likely to exceed the imagination.

Cai Jin, director of the China Logistics Information Center, pointed out that due to inflation, environmental protection, energy conservation and emission reduction, it is also possible to increase the cost of steel mills, so it is possible to further squeeze the profit margin of the steel industry, even if the price rises. Profits do not necessarily rise in tandem with prices.
 

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