Didn't the steel market bottom? Is there no cost pressure release?

At the beginning of January this year, the price of steel that continued to slide for more than six months saw a slight recovery. This led people to think that the recovery of the steel industry has bottomed out. However, the price of steel has suddenly turned back down in less than a month. According to the People's Daily report on April 6th, analyzing the reasons for the short-term warming of the market, although there is a market recovery of confidence in the 4 trillion yuan of government investment and a series of revitalization plans, it is more common for some steel traders to misjudge steel prices. It has already bottomed out and is due to speculative purchases.
Didn't the steel market bottom?
“The steel industry is the industry that has suffered the hardest hit. The production and operation status of other industries, including the reduction of orders, all began in October last year, and Taigang’s exposure to the market was due to the large proportion of stainless steel products exported. Changes in the environment came earlier. From April and May of last year, we had already felt some changes and became more and more obvious. We must admit that the steel industry has encountered unprecedented challenges,” said Li Xiaobo, chairman of TISCO.
Taigang is the world's largest stainless steel production base. According to Li Xiaobo, Taigang exported 360,000 tons of stainless steel in 2007 and 310,000 tons in 2008. As of March 26 this year, less than 10,000 tons of stainless steel was exported, a year-on-year drop of 80%!
This is evident in the downturn in the international market. What about the domestic market?
A survey of some steel companies in Hebei revealed that many small steel companies have stopped production. The short-term “warming up” of the steel market at the beginning of the year reflects the quick start of a small steel company, but it was shut down again in a few days.
In China’s steel giant, Hebei Iron and Steel Group, Chairman Wang Yifang told reporters: “After investigation, the national steel inventory level is now 10 million tons, while the normal level in previous years should be about 2 million tons. The 'recovery' in the previous period is not a market. The true reflection of demand is that steel has not reached end users."
According to statistics, from January to February of this year, Hebei Iron and Steel Group produced 5.45 million tons of steel and 5 million tons of steel; sales revenue was 18.6 billion yuan, a year-on-year decrease of 25%; and profits were 190 million yuan, a year-on-year decrease of 84%.
The recovery of the steel industry depends on the recovery of downstream demand. Li Xiaobo, chairman of Taiyuan Iron and Steel Group, analyzed: “At present, the largest consumer of steel – real estate, shipbuilding, etc., are still under-employed, and the demand for steel remains low. The country’s stimulus plan and revitalization plan will also need a process. At the same time, we must also see signs of recovery in the fields of agricultural machinery and household appliances, and the space for the steel industry to explore has been extremely limited."
Can the steel industry recover and rejuvenate in the short term? Wang Yifang expressed cautious optimism: “With the gradual recovery of downstream demand, the harshest winter of steel companies is passing. However, steel companies in 2009 are still full of challenges. The deterioration of steel exports is beyond our expectation, and we do not rule out China in March. It became a net importer of steel products. Especially in the second half of the year, the iron and steel industry completed investment in fixed assets of 324 billion yuan, equivalent to 50 million tons of new steel production capacity. These new production capacities will be released in the second half of this year."
A slight rebound will bring about a slight warmth, but it seems very difficult for the steel market to get out of the “winter” in 2009.
Is there no cost pressure release?
People's Daily reported yesterday that the reasons for the large-scale loss of steel enterprises in 2008 and the high cost of iron ore will undoubtedly become the “culprit” for the losses of steel companies.
Wang Yifang, chairman of Hebei Iron and Steel Group Co., Ltd., said: “In 2008, China’s imported iron ore averaged 136.2 US dollars per ton, an increase of nearly 48 US dollars per ton compared to the previous year. This industry alone pays more than 1,460 yuan. 100 million yuan, which is equivalent to the total annual profit of the national steel companies."
According to statistics, in 2008, China’s pig iron production decreased by 744,900 tons compared with the previous year, a decrease of 1.16%. Under the circumstances that the production of raw ore increased by 20.74%, the imported iron ore also increased by 60,564,100 tons over the previous year, an increase of 15.81%. In 2008, the import volume of iron ore in China greatly exceeded the actual demand, which not only raised the import price, but also caused enterprises to bear the heavy cost burden of high inventory of high-priced raw materials.
According to information provided by TISCO, in the first half of last year, China’s coking coal prices rose by more than 100%, scrap prices rose by more than 68%, ferrochromium prices rose by more than 70%, and prices of various raw materials have decreased since the second half of last year. However, the decline lags behind the sharp drop in steel prices.
"Compared with last year's long-term agreement price, the current market price of iron ore is only 600 yuan per ton, which is less than half of what it was at that time. We are looking forward to this year's negotiations on long-term iron ore prices. Iron and steel raw fuel and shipping market There is a lot of uncertainty, but the downside is also very limited. In general, the cost pressure is being alleviated." Wang Yifang said.

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