2012 steel price is weaker, strong, low, high

In the first 11 months, the profits of state-owned enterprises exceeded 2 trillion yuan in profitability. Monthly decline On December 21, 2011, employees of a large-scale state-owned steel product manufacturing enterprise in Huaibei City, Anhui Province, viewed steel products such as seamless steel tubes. In the first 11 months of this year, the main economic performance indicators of state-owned and state-controlled enterprises continued to grow year-on-year, achieving a profit of 204.56 billion yuan. However, compared with the same period of last year, profitability has decreased for several months.


In 2011, the Chinese steel market showed a relatively strong demand, a significant increase in domestic production, and a high market price. Looking into the next stage of the market situation, it is expected that the global collective "rescue" will become the biggest factor, which will lead to major changes in China's macro-control, and push for a rebound in the price of steel and its raw materials.

China's steel market presents three major characteristics in the next two years

Since 2011, the Chinese steel market has mainly exhibited three major characteristics:

The first is that consumer demand is relatively strong. According to preliminary calculations, from January to November 2011, the national total crude steel consumption (including direct exports, the same below) was approximately 630 million tons, which was approximately 10% higher than the same period of last year. It is estimated that the full-caliber consumption of crude steel in 2011 will be close to 700 million tons, an increase of no less than 10% from the previous year. If you do not consider adding new inventory and eliminating simultaneous exports, its annual apparent consumption will also be about 670 million tons, only a step away from the 700 million tons mark.

The consumption of crude steel, which is close to 700 million tons in one year and increased by about 10%, cannot be concluded in any case, but it should be considered to be relatively strong. Even if the national growth rate of crude steel consumption fell back to 8% in 2012, it is expected that the full-caliber consumption of crude steel will also be around 750 million tons.

Followed by a substantial increase in domestic production. The relatively strong consumer demand has stimulated a substantial increase in domestic production. According to data from the National Bureau of Statistics, from January to November 2011, the country's crude steel production was 63.09 million tons, an increase of 9.8% over the same period of last year; steel production (including double counting in statistics, the same below) was 81.04 million tons, an increase of 13.1%. Both show a high level of growth. This also reflects the strong consumer demand from another aspect. Similarly, according to the growth rate falling to 8%, it is expected that the national crude steel output in 2012 will not be less than 750 million tons.

The third is the high price of the market. Although the prices of domestic steel products have been falling continuously for two consecutive months since the second half of the year, overall, the steel market prices are still higher than the previous year's level. According to the Lange Steel Network monitoring data, from January to November 2011, the national steel price index was 187.8 points, up 12.3% over the same period of last year. Judging from the year-round operating situation, the situation is basically high and low.

The analysis of high operating costs of steel prices is mainly driven by production costs. According to customs statistics, from January to November, the average price of iron ore imports nationwide was US$166/ton, up 31.5% from the same period of last year. In addition, the increase in wages, fuel, and electricity prices, as well as several interest rate increases by financial institutions, have also played a major role in promoting this.

The price trend of steel and its raw materials in 2012 has great uncertainty. The biggest turbulence factor is whether there will be a more serious recession in the world economy and whether there will be a hard landing in the Chinese economy. From a year-round perspective, China's steel prices are far weaker and stronger, and they are low and high.

Global collective "rescue" will become the biggest influence factor

Judging from a period of time in the future, the biggest influencing factor in China's steel market will be the collective “recovery of the market” by the global community and the substantial adjustment of China’s macroeconomic policies under its influence.

The growing "two-debt crisis", especially the European debt crisis, has caused worries about a more serious recession in the world economy. If left unchecked, Greece, Italy, and other countries will “hard contract default” and spill their risks into core countries such as the UK and France, thus delaying Western countries and the global financial system. The worst situation is the collapse of the euro zone, the euro became "waste paper," causing a more serious recession in the world economy, and even an unprecedented Great Depression.

In order to avoid this kind of disaster, all countries in the world must join hands to “rescue the market”, even if they pay a high cost to do so, otherwise the losses will be even more severe. The recent Federal Reserve Bank and other major Western countries’ central banks have taken joint actions to reduce the commercial bank’s interest rate on U.S. dollar borrowing. This shows that determination.

How can countries around the world actually rescue the market? It should be said that the most important means of bailout is to start printing machines and inject liquidity into the market.

Of course, to solve the problem of some countries’ sovereign debt crisis and solve the problem of liquidity shortage in some financial institutions, it is also possible to solve the issue of loans to fiscal surplus countries and transnational corporations by issuing more bonds. However, the problem is that these countries have huge fiscal deficits and debt balances. The outlook for national debt is negative and there is a lack of investment protection. Affected by this, emerging economies and transnational corporations are also unwilling to invest in bonds.

It can thus be seen that the settlement of the debt crisis in Europe and the United States, in addition to relying on the central bank to purchase government bonds, continues to inject liquidity into the market, and there is no alternative way out. Based on this forecast, the Fed will not only launch QE3 (the third round of quantitative easing monetary policy), but will even launch QE4 and QE5 until the economy re-enters the growth channel and the unemployment rate reaches a reasonable level. The European Central Bank’s purchase of European bonds will also become the final solution to European countries’ debt problems.

The result of the world's major economies operating printing machines together is, of course, a large amount of liquidity entering the market, diluting material wealth, and pushing up the prices of bulk commodities such as iron ore and metals. In the medium and long term, global commodity prices continue to operate at a high level. Trends in the international market such as oil, metals, and ore continue to fluctuate upward, and they have passed earlier highs. For example, oil prices will exceed US$150/barrel, and iron ore prices will reach 200 US dollars / ton. It must be observed that we are on the eve of severe global inflation.

Expanding domestic demand, ensuring growth, and “going out” are measures

In the face of the ever-deteriorating debt crisis in Europe and the United States, and the collective “rescue” of the global economy, what adjustments will China’s macroeconomic policies make and how should China’s relevant parties respond?

First, expand domestic demand and prevent the worst possible situation. Regardless of how the debt crisis in Europe and the United States is resolved, China will experience an external operating environment that is deteriorating, and it may also suffer from the unexpectedly declining impact of domestic steel-critical industries—manufacturing, construction, and exports (including indirect exports). It is expected that in the first half of 2012, China’s internal and external demand, especially foreign trade, will be even more severe. To this end, a series of measures must be taken to increase domestic demand and prevent the worst possible economic situation.

It should be noted that there is still much room for China to strive to expand domestic demand and respond to the deteriorating export situation. One of the important aspects is to strengthen the construction of environmental protection and provide a better space for people's livelihood and economic growth. To meet this most demanding demand, invest tens of trillions of yuan in environmental protection construction, and gradually increase the quality of air, land, and water resources in China to the world’s advanced level, and at the same time create a strong environmental protection equipment industry that will provide millions, Tens of thousands of jobs. It should be regarded as a new growth point for China's steel demand and a new growth point for China's economy.

Secondly, increase the price increase tolerance, and insist on maintaining the primary goal of growth. The current rise in China's price level is more of an increase in structural costs caused by economic imbalances, and it has a long-term upward trend. It is by no means our unilateral tightening of demand to solve the problem. Therefore, we must proceed from reality and raise the tolerance for China's price rises over a period of time. We must return the primary goal of macroeconomic regulation and control to “guarantee growth” and at the same time take into account the problem of excessive price increases.

It should be pointed out that at present, only monetary policy is fine-tuned, and the intensity is not enough. It is difficult to disperse the panic of fear and reverse the lack of confidence between producers and operators and investors. Therefore, there is a need to increase policy easing efforts, such as further reducing the deposit reserve ratio, lowering the ** interest rate, encouraging first-home suites and improving the demand for housing, and large-scale construction of environmental protection. The relatively large adjustment of monetary policy towards loosening is conducive to the increase in demand for steel.

Third, resources are king and adhere to long-term strategic layout. The era of the future is still an era of "resources are king". It is an era in which resources cannot be copied and banknotes can be printed in large quantities. Under such circumstances, China must make the best use of overseas resources, encourage enterprises to use imported ores and coal as priority, and must not talk about turning points in the iron ore market, wishing to bet on the so-called Feng Shui rotation. Therefore, relevant Chinese departments and iron and steel enterprises must formulate a long-term strategy for the global resource distribution. To use the existing $3 trillion in errands, we must do everything possible to go out and buy as many bulk commodities as possible, including resource rights and resource products. At the same time, iron and steel enterprises should also be encouraged to invest and set up factories abroad. This is also an important way to realize the diversification, materialization, capitalization, and equity of China’s gamut reserves and to avoid serious loss of value. It is also China’s realization of energy conservation and emission reduction and adjustment of economic structure. Important aspects.