Under the pressure of overcapacity, from the increase in steel mill inventory and the sharp decline in billet prices: it reflects that the production and operation behavior of steel companies has not been adjusted to grasp the trend of the "normalization" of China's economy. The result of excessive market price competition will inevitably push steel companies to the trap of loss.
The deep drop in steel prices in September and September has caused steel companies and steel traders to fall into the trap of losses again.
1. The sharp long-term downward trend of iron ore prices has created conditions for steel companies to turn losses into profits, and also caused excessive price competition for steel companies, causing market prices to fall sharply, and once again fell into a loss trap crisis.
With the inevitable slowdown in China's economic development stage, the era of high demand for steel consumption and non-growth has arrived. This year's statistics show that China's steel consumption has not increased. Although the import of iron ore in August was 82.52 million tons, a record high, but the import in August was 74.88 million tons, down 9.26% from the previous month. In September, port iron ore stocks remained at a record high of 113.7 million tons. China's imported mine port inventory and domestic mining enterprise inventory have shown a double-up trend. As the three major mines and the international mining industry are just like the trend of China's rapid new steel production capacity investment in previous years, the international iron ore new capacity is rapidly released. This year, international crude steel production has only increased by a little more than 2%. The international iron ore market not only faces excessive pressure, but also loses the conditions for speculation about China. The market price of imported iron ore has shown more market pressure than the drop in steel prices this year.
In the third quarter alone, iron ore prices in the international market fell by 15%. By August 18th, the price of 62% Australian powder has dropped to 82.75 US dollars / ton. Compared with the import price of 139.87 US dollars at the beginning of this year, it dropped by 57.1 dollars, down 40.8%. At the same time, the price of secondary metallurgical coke in Shanxi fell by as much as 26%, and the price on September 15 was 860 yuan/ton, which was 57% lower than the high point in 2011. This aspect reflects the fall in the price of international iron ore in the steel market, and the price decline in the same period is far greater than the decline in steel prices. On the other hand, in the different periods of the first three quarters of the steel industry in the first quarter of this year, as the cost declines, it will inevitably have a major impact on the company's serious losses and meager profit and profitability.
2. Under the pressure of overcapacity, the increase in steel mill inventory and the sharp decline in billet prices are reflected: it reflects that the production and operation behavior of iron and steel enterprises has not been adjusted to grasp the trend of the â€œnormalizationâ€ of China's economy. The result of excessive market price competition will inevitably push steel companies to the trap of loss.
Many steel mills have returned to profitability as steel prices have remained stable this year and iron ore prices have fallen sharply. However, with the downward pressure on the Chinese economy and the difficult growth in steel demand, overcapacity in steel has also put the steel market under downward pressure. Under this severe market situation, steel mills have gradually returned to profit due to the sharp drop in iron ore prices. Generally speaking, under the weak market situation, the decline in the profitable billet and steel prices is also a normal market phenomenon. The problem is that steel mills, especially steel billet manufacturers in Tangshan, compete for market contracts, triggering excessive billet price competition. When the price falls near the cost of the steel mill, the marginal cost is used to guide the market price, and the continued continuation of the excessive billet price competition can only bring the steel mill into a deep deficit trap. And each time the price of billet fell, it only expanded shipments in the short term. However, it was quickly discovered that there was no change in the demand for the steel market and the grim situation. The operating capacity of steel mills has pushed the limits.
In fact, at the end of April 2014, the ex-factory price of Tangshan billet (Q235) billet has entered a downward trend for nearly five consecutive months. In particular, the price decline has accelerated significantly since August. Billet prices fell below 2,400 yuan from 2,700 yuan on August 1.
The fall in billet prices has increased the market's expectation of falling construction steel prices.
On August 22, Tianjin's third-grade thread was 3080 yuan/ton, and the national average price was 3105 yuan/ton. The price of 5.5mm hot coil is 3320 yuan / ton. However, by the end of September, the price of the third-grade earthquake-resistant large snail in Tianjin market was 2820 yuan/ton. Shanghai market three-level big snail 2720 yuan / ton. The closing price of HRC in Tianjin market was 2,880 yuan / ton. This round of iron ore prices fell sharply, causing a sharp drop in prices in the steel market. In just over a month, the market deducted a deep drop in the price of steel of more than 300 yuan per ton. As a result, the steel companies not only lost all the profit margins brought by the fall in iron ore prices to the steel enterprises, but also caused the traders with a lot of stocks to suffer heavy losses. Steel companies and steel traders are once again trapped in losses. The entire market is shrouded in a pessimistic mood.
It also faces the downward trend of international iron ore prices, and also faces the general trend of weak international economy. However, from the perspective of the trend of China's steel export prices, the stability of China's steel market and the international steel market price trend is indeed small. difference.
The profound revelation of the sharp drop in steel prices in September and September
There are many reasons for the rapid decline in prices in the steel market at the end of August and early September. A sharp drop in steel prices caused a sharp drop in steel prices. The underlying reason is that the steel mill price policy is not sure to adhere to the cost management to survive, and should be compatible with the long-term general trend of stable economic stability and weak steel market demand and low price fluctuations. This also reflects the gap between the Chinese steel market and the market order of developed economies.
If the global inflation bubble bursts in the middle of 2008 and mid-2011, the reversal of the financial and economic crisis triggered a sharp fall in commodity prices, which is the market reason. However, considering that billet and steel prices are close to the cost of steel mills, prices continue. The decline is a market cause and lacks dialectics. After all, market trade is operated by people.
Under the fierce market competition, the dominant enterprises with market monopoly can achieve the strategic goal of expanding market share by virtue of price competition strategy. However, steel billet producers that are similar to each other often do not have this advantage. The result of excessive price competition can only cause the company to fall into the trap of deep losses, and the severe market situation has not changed. As an article describes: Tangshan steel enterprises are suffering the most tragic pain in the past decade. The steel market is cold and clear, and the company is shut down in large areas and unable to save itself.
A slight fall in economic data in August has increased concerns about the market. It also cast a shadow over the market confidence that the economy rebounded slightly from June to July. The downward pressure on the economy is not the same as the downward trend in the economy. Since the second quarter of this year, the government has adopted a comprehensive reform strategy and concentrated efforts in key areas of potential demand. In the game of economic downward pressure, the government's economic regulation and control policies have played an active role in maintaining the stable operation of the economically reasonable growth rate. Although the economic data in August fell slightly, the manager's purchasing index continued to maintain 51.1%. It also shows that the megatrend of the economy operating stably in the 7.5% zone has not changed.
After all, Chinaâ€™s secondary industry has already seen a surplus economy, and the areas where potential demand is available have narrowed. In the past, cement plants in the eastern region, steel mills can produce a contribution to GDP. However, it is difficult to have such market opportunities in the central and western regions. The construction of affordable housing projects faces the need to maintain a stable pressure coordination relationship in the real estate market. Despite the government's concentrated efforts in the three areas of railways, highways, and people's secure housing, the total investment exceeds 3 trillion. At the same time, it has increased the promotion of the Yangtze River Economic Belt, the urbanization of the central and western regions, and regional economic development, but it has not lifted the Chinese economy out of downward pressure. The macroeconomic operation data released by the National Bureau of Statistics in August showed that the industrial added value of industrial enterprises above designated size increased by 6.9% year-on-year in August, down 2.1 percentage points from July. Electricity production in August was negative for the first time this year, down 2.2% year-on-year. In addition, the growth rate of fixed asset investment in January-August was 16.5%, continuing the trend of steady downward trend in the past two years.
However, the contribution rate of the service industry to the economy is close to 52%, far exceeding the contribution rate of industry to the GDP economy. China's economic structure is improving. However, the intensity of steel consumption has dropped significantly. The combined effect of these factors has further slowed the demand for the entire steel market. As a result, the orders of steel enterprises declined, and the national steel stocks of key steel enterprises were 15.136 million tons, showing a rising trend. This is also an important factor affecting the sharp drop in steel market prices at the end of August and September.
The general trend of the stable operation of the Chinese economy in a reasonable range has not changed. Compared with last year, the regulatory policy has matured. Recently, the government has once again raised the depreciation rate of enterprise equipment, promoted technological transformation of enterprises, and improved competitiveness. The increasingly rationalization of social and economic structural relations and the transformation of economic growth patterns are releasing new economic vitality.
In contrast, steel prices have fallen into the cost of steel companies. The economy is facing downward pressure, and the weak steel market has shown a general trend. Under the condition that the steel market price once again falls to a low point, the steel market price trend can only interpret price fluctuations in the meager profit range of the steel industry. Therefore, it can only interpret the evolution of small fluctuations in prices. This is a big trend, not a short-term trend. Iron and steel enterprises and steel traders need to control the general trend and strive to maintain the stable operation of the market in a reasonable price range.
After entering the fourth quarter of last year, many commodity prices fell to a low point. Steel prices have also fallen into the cost line of steel mills. The price decline has narrowed significantly. In fact, faced with market weakness and downward pressure on prices, traders are striving for survival and tenacious game, so that the price fluctuations at the bottom of the steel market continue to this mid-August this year. This is a major trend in the price trend of the steel market. Although the market continues to face downward pressure on prices, but supported by cost, the steel market has finally shown a general trend of small price fluctuations. This kind of price trend has already deviated from the loss risk for the steel trade industry.
In fact, in the market situation where weakness has been regularized, market demand, steel production control, short-term economic favorable factors, and steel industry losses are all factors that affect steel price trends.
The soldiers have no regularity and the water has no regularity. This requires coordinating the above four factors to prevent the industry from falling into a trap of losses. Gradually establish market operation order and operating price countermeasures that are compatible with the market's weak normalization trend. In particular, gradually establish a business order that controls production and market demand, and reduce the downward pressure on prices brought about by blind increase in production. At present, steel companies are facing a trend of weak market normalization, and it is late to regulate the production of enterprises and the market operation mode. This further illustrates the urgency of this issue. Faced with the weak trend of the steel market, steel companies and steel traders who have once again fallen into a loss trap will face a common market problem of â€œcost management and survival model innovation and developmentâ€. In response to this general trend, steel mills and steel traders need to compete with market downside pressure. If the laissez-faire price falls, it will be difficult to get out of the trap of operating losses.
At the end of 2011, under the severe market situation, Jinan Steel Traders did not continue to drop prices, but with short-term positives, the price of steel pulled up 200 yuan, so that life-saving money got rid of the industry losses. This practice has affected Tangshan Steel traders. It also created the trend of Tangshan billet leading the steel market. Some market analysts even said that Tangshan billet prices are not moving, there is nothing to say in the market. In fact, the steel enterprises need to not only reflect the market downward pressure game, but also maintain the legitimate business rights and interests of enterprises, and can adjust the unsuitable market relationship and reflect the market evolution trend. Only in this way can the company exert its influence on the market trend. Deviating from this direction, it lost the positive significance of leading the market.
Perhaps the current price of deep losses traps Tangshan steel billet enterprises suffer. In late September, Tangshan billet prices rose by nearly one hundred yuan. The rebound in billet prices will inevitably lead to a bottoming out of steel prices. This price recovery is not a change in the relationship between supply and demand, but the pressure of corporate losses has turned into a driving force to drive prices to a reasonable range. Iron and steel enterprises as a whole get rid of losses, and the implementation of low-profit operations also requires unremitting efforts. After all, the company's meager profit management is justified and acceptable to the market.
On September 15th, an editor of China Steel Spot Network once asked me this question.
The article reads: "The August data undoubtedly indicates the economic downside risks, and it will cause the old problem that China's GDP growth may not meet the standard. To maintain the economic growth rate of about 7.5%, China should further introduce easing policy, but this time is very difficult. Big, China has been implementing a prudent monetary policy since last year. We have not relied on 'strong stimulus' to promote economic development, but rely on 'strong reforms' to stimulate market vitality. Not relying on "strong stimulus" depends on "strong reform". These have made the current development of the steel industry difficult!
In combination with the current situation of China's steel industry, Professor Ma, how do you think the current steel industry will survive in the reform?
What new information should we focus on when the steel industry is facing extreme difficulties? What new pressure do we need to withstand? â€
From a strategic point of view, there are many problems to be solved in the steel industry. And many problems are solved as a difficult process of practice that requires reform and strategic adjustment. The current outstanding problem is to emerge from the trap of a sharp drop in steel prices in September. Firstly, it will create a living environment for enterprises to adapt to the trend of future market evolution, and also create necessary operational stability conditions for enterprises to deepen management system reform and strategic adjustment. It is for this reason that during the National Day I wrote the inspiration for the sharp fall in steel prices in September.
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