Highlights in the first half, challenges in the second.
In the second half of this year, domestic steel prices are expected to fluctuate within a range. In the short term, strong policy expectations may lead to a phased recovery in steel prices, but in the long run, the supply and demand pattern remains the key factor determining the trend of steel prices." Recently, Zong Weidong, deputy general manager of Shagang Group, made predictions about the steel market in the second half of the year in an interview with a reporter from China Metallurgical News. steel market situation.
Zong Weidong said that if the supply side is not effectively controlled in the second half of the year, and there is no unexpected growth in demand, the upside potential for steel prices will be limited, the overall price center may be lower than in the first half of the year, and there may be downward pressure during certain periods.
Looking back at the steel market situation in the first half of the year, four highlights impressed Zong Weidong. "Although the steel prices generally fluctuated and fell in the first half of the year due to insufficient downstream demand and a significant imbalance between supply and demand, there were also some positive performances, demonstrating the resilience and adjustment capabilities of the steel industry and enterprises in a complex market environment." he said.
First, the industry's profitability has significantly improved, and the effectiveness of steel companies adhering to the "three certainties and three prohibitions" business principles is evident. In the first half of the year, the total profit of key steel enterprises statistically reported by the China Iron and Steel Association was 59.2 billion yuan, a year-on-year increase of 63.26%; the average profit margin was 1.97%, a year-on-year increase of 0.83 percentage points.
Second, the demand structure has shown positive changes, with steel demand in areas such as automobile and home appliance manufacturing significantly increasing.
Third, although supply is stronger than demand, steel inventories remain at a low level in recent years. Since the beginning of this year, the connection between production and sales has been smooth, and steel inventories have been at the lowest level in nearly four years.
Fourth, the commissioning of some steel projects has optimized the industrial layout and enhanced the overall competitiveness of the steel industry. At the same time, steel enterprises have a more realistic and clear understanding of the change in the industry from "incremental development" to "decremental optimization and adjustment, and improvement of the quality and efficiency of existing stocks," and the measures taken to control production, adjust structure, improve product quality, strengthen management, reduce costs, and prevent risks are also more pragmatic.
“In the second half of the year, the situation facing the steel industry remains complex and severe, with both challenges and opportunities." Zong Weidong analyzed from both the supply and demand sides. From the demand side, the proactive fiscal policy, the implementation of tens of billions of yuan in ultra-long-term special government bonds, coupled with the coordinated monetary policy, will continue to provide impetus for infrastructure investment and support the release of steel demand. At the same time, industrial upgrading and equipment renewal are expected to continue to drive the growth of steel demand in the manufacturing industry, especially high-end plates, special steel and other varieties. The demand for high-quality steel in industries such as automobiles, home appliances, and equipment manufacturing will maintain a certain resilience. However, the continued downturn in the real estate industry remains a major challenge. It is expected that the area of new housing starts will continue to decline in the second half of the year, which will significantly suppress the demand for construction steel . Although the "guaranteeing the delivery of houses" work can maintain some demand, it is difficult to offset the overall impact of the downturn in the real estate market.
“From the supply side, the expectation of flat control of crude steel production in the second half of the year still exists." Zong Weidong also expressed concerns. "Currently, the profit per ton of steel for steel enterprises has reached a high level since the beginning of this year. With the improvement of steel enterprises' profits, their production enthusiasm may increase, and there is a risk of elastic release on the supply side. If production control is not strict in the second half of the year, it may lead to the growth rate of supply exceeding the recovery rate of demand, thus exacerbating the supply-demand contradiction and further compressing the industry's profit margin.”
