Article source: China Steel Price Network

As the weather gradually improved, the steel market “Golden Three Silver Four” gradually approached. After the cold winter of some downstream industries experienced last year, the policy of the “two sessions” will make the demand warmer? What is the release of capacity this year?

In this issue of Mysteel, we invited Hu Shinan, a hot and cold rolling analyst in the Steel Division, to hear how she analyzed it.

Core point of view:

1. The manufacturing industry and other industries have lowered the VAT rate by 3%, which is good for the entire downstream industry. In addition, attention should be paid to measures to promote consumption in rural areas such as car purchases for rural residents, new energy vehicles, and second-hand car transactions for small-displacement vehicles. It is understood that there is no higher-level overall policy, and the measures are based on local development of relevant stimulus policies, which are beneficial or more implemented in new energy vehicles.

2. It is estimated that the sales growth of excavators and loaders will remain at 22% and 8% this year. The growth rate of automobile sales was basically flat this year. The consumption policy of household appliances hedged the impact of real estate, and the decline of steel for household appliances was limited. There is a phased export looting effect in the near future.

3. It is estimated that 2019 tons of hot rolling mills will release 20 million tons of capacity, mainly in the second half of the year. The cold rolling mill learned about an increase of 600 million tons in 2019 and future plans. ESP is expected to be partially added this year and needs constant attention.

4. There is room for increase in cold and hot rolling prices in March and March, but the magnitude and speed are relatively mild. If the downstream favorable policies fall below expectations, then the price pressure in the second half of the year will be greater than the first half.

The following is an interview record:

Xiao Bian: Last year, the downstream industry of the plate was not very prosperous. Is there a favorable policy for the downstream industry of the plate at the two sessions?

Hu Sai-nan: At present, there is no particularly targeted policy at the two sessions, but industries such as manufacturing industries have lowered the VAT rate by 3%, which has already formed a positive effect on the overall profits of downstream enterprises.

In addition to the two sessions, we should pay more attention to the relevant programs issued by the National Development and Reform Commission on January 29, and introduce measures to promote consumption in rural areas such as car purchases, new energy vehicles, and second-hand car transactions for small-displacement vehicles. This is the first time that the “car to the countryside” policy has been restarted after 10 years.

However, from the situation we have learned, there is no higher-level overall policy, and the local government will formulate relevant stimulus policies, which will be better or more implemented in new energy vehicles.

Xiao Bian: Under the financial expenditure, this year's growth in infrastructure investment is expected to rebound, which is good for construction steel. How about the demand for sheet metal?

Hu Sai-nan: The main demand for hot rolling comes from machinery. The main demand for cold rolling and galvanizing comes from household appliances and automobiles.

Last year, sales of excavators and loaders increased by 45% and 22%. This year's construction machinery sales growth will not remain high. However, the recovery of infrastructure investment growth still has a bottoming effect. It is estimated that the sales volume of excavators and loaders will remain at 22% and 8% this year.

The growth rate of car sales is basically flat this year. The domestic power plant said that the current construction has been much better than before. It can be seen that the price of galvanized sheet is relatively firmer than that of hot and cold rolling. Household appliance consumption policies have a tendency to hedge real estate, and steel for home appliances has declined.

In addition, there is still an export-removing effect in terms of recent demand. Due to the adjustment of EU tariffs in the later period, steel mills are now stepping up their export tasks, which has reduced the pressure on domestic sales of some cold-rolled deep-drawing and galvanizing resources, but this is only a phase effect.

Xiao Bian: Is there any current production policy for rolled products? What is the current utilization rate of cold and hot rolling capacity compared with last year?

Hu Sai-nan: From the data of capacity utilization rate, the impact of some environmental protection and production restrictions has not been transmitted to the hot and cold rolling production line in the near future. Only some steel mills are undergoing normal maintenance.

This week, our network research data, hot rolling capacity utilization rate of 80.28%, 79.22% in the same period last year, an increase of 1.06%, cold rolling capacity utilization rate of 75.21%, 82.33% in the same period last year, down 7.12%. Since January this year, the utilization rate of cold rolling capacity has remained at a low level. The main reason is that the cold and hot rolling price gap has narrowed the profit of steel mills, and the restructuring of several steel mills last year also led to the reduction of cold rolling capacity.

Xiao Bian: We understand that the hot rolling production line has increased in production during the year. Is the supply pressure of cold and hot rolling still high this year?

Hu Sai-nan: Last year, I investigated the hot rolling capacity of 283 million tons, an increase of more than 10 million tons. We estimate that 20 million tons of capacity will be released in 2019. The production of new hot-rolled production lines is mainly concentrated in the second half of the year, and the supply pressure has increased.

Last year, the cold rolling capacity was around 140 million tons. This year, a total of 600 million tons of planned production is planned. Although the cold rolling capacity is not released much, it needs to pay attention to the release of ESP capacity. ESP can replace some low-end cold products, and this year is expected to have Partially added.

Xiaobian: What do you think of the hot and cold price in March? What risks do you need to pay attention to?

Hu Sai-nan: For the perspective of sheet prices in March, the market is relatively uniform – there is room for growth in March-April, but the magnitude and speed are relatively mild.

First, in terms of cost, raw material prices have risen, and the gross profit of hot coil mills is only 80-90 yuan/ton. Some steel mills have net profit losses. In terms of inventory, this week, our network researched cold and hot rolling total inventory data continued to decline, overall Compared with the same period of last year; in terms of mentality, the market expectation for March still exists, and the mentality is good; in terms of transactions, the sample of cold rolling traders surveyed by Mysteel in 2019, the overall volume of the same-caliber sample in the next ten working days after the year Released better than last year.

However, if the downstream favorable policies fall short of expectations, then in the second half of the year, the supply pressure will be higher than the first half of the second half of the year.