Why the 'ice and fire' disparity in sales of different types of steel in the first half of the year?
In the first half of this year, which steel products sold well, and which were relatively sluggish? What were the underlying reasons? Recently, a reporter from China Metallurgical News interviewed Zhang Qiusheng, an expert from the think tank of the China Metal Materials Circulation Association and secretary-general of the Nanjing Iron and Steel Industry Association, to analyze the sales of different types of steel products in China during the first half of the year.
Sales of different types of steel in the first half of the year were a mixed bag of hot and cold.
Zhang Qiusheng stated that there were mainly three types of steel products that sold well in the first half of the year.
Firstly, high-end industrial sheet materials, especially those used in automobiles and home appliances, as well as electrical steel and high-strength steel. He analyzed that the strong sales of these steel products were primarily supported by the manufacturing industry. In the first half of the year, the production and sales of automobiles, especially new energy vehicles, maintained rapid growth; home appliance exports and domestic sales remained relatively stable under the stimulus of policies such as trade-in; the shipbuilding industry had a full order book and was busy with production; and the new energy manufacturing industry, such as wind power and photovoltaics, continued to grow. These factors provided strong support for sheet material demand. Secondly, product demand upgrades were a driving force. Downstream industries increased their demand for high-strength, lightweight, and corrosion-resistant high-performance steel sheets, and the profit margins of high-end products were relatively good. Finally, exports provided a boost. In the first half of the year, thanks to the price advantage of some of China's sheet products in the international market, export volumes remained high.
Secondly, some seamless steel pipes , such as those used in oil and gas exploration (oil well pipes, pipeline pipes) and boiler pipes (mainly used in power generation and chemical industries). The strong sales of these steel products were mainly due to the continued growth of investment in oil and gas exploration and development under the national energy security strategy; the approval and construction of some thermal power projects; and specific demands from the chemical industry. The steel demand in these areas is rigid demand.
Thirdly, steel for steel structures, such as H-beams . The strong sales of these steel products are due to the increased use of steel structures in bridge, venue, and industrial plant construction; at the same time, the promotion of green buildings has had a positive impact on steel structure housing, bringing increased demand for steel for steel structures.
Zhang Qiusheng introduced that there were also three main types of steel products that were relatively sluggish in the first half of the year.
Firstly, construction steel , such as rebar and wire rod. There are four reasons for the relatively sluggish sales of these steel products: Firstly, the continued downturn in the real estate market, with a significant year-on-year decline in the area of newly started construction, has become the biggest drag on construction steel. Secondly, the availability of funds for infrastructure projects has been uneven, and some projects (especially local projects) have been constrained by funding issues, resulting in lower-than-expected actual construction intensity and steel demand. Thirdly, there is severe homogenization competition in construction steel products, with frequent low-price competition, affecting the profitability of construction steel producers. Finally, steel inventories are under pressure. In the first half of the year, the decline in social inventories of construction steel slowed down, and social inventories of construction steel were relatively high in some regional markets.
Secondly, ordinary medium and thick plates . Zhang Qiusheng stated that although these steel products have some support from the shipbuilding and steel structure industries, due to the relatively weak demand in the engineering machinery sector, coupled with the fact that the supply of ordinary specifications of medium and thick plates is significantly greater than demand, prices have been under pressure.
Thirdly, ordinary welded pipes . These steel products are mainly used in building scaffolding and structural components, therefore, they are greatly affected by real estate and infrastructure construction, coupled with excessive supply, leading to fierce market competition.
Divergent demand is the root cause.
"For steel companies and steel traders, the sales environment in the first half of the year was more challenging than in the same period last year." Zhang Qiusheng said, "The enthusiasm of end-users for procurement has cooled somewhat, and they are more cautious and rational in their operations. Construction steel is facing enormous pressure and is the most difficult product to sell; while high-end industrial sheet materials used in automobiles, home appliances, ships, and new energy industries are selling relatively well, with strong demand for some products."
He believes that the reasons for the different "hot" and "cold" performances of these products are mainly fourfold.
First, the divergence of downstream demand is fundamental. The deep adjustment of the real estate industry and the support of infrastructure construction, coupled with the resilience of the manufacturing industry, have created a stark contrast, resulting in a "two-sided" market situation for construction steel and industrial sheet materials.
Second, funding constraints are a key bottleneck. The funding shortage throughout the industry chain in the first half of the year suppressed the increase in end-user procurement willingness, resulting in lower-than-expected effective demand.
Third, supply adjustments have lagged. Zhang Qiusheng stated that although relevant departments made it clear at the beginning of this year that they would continue to implement crude steel production control policies, and some regions and enterprises have taken production restriction measures in the first half of the year, steel enterprises are affected by production inertia, and supply adjustments take time, leading to increased supply pressure for some products in the short term.
Fourth, market confidence is weak. Market participants remain concerned about the future economic recovery and demand, and generally adopt defensive strategies, suppressing speculative demand and restocking enthusiasm.
"Whether the sales of sluggish steel products can improve in the second half of the year will depend on several factors: whether the real estate adjustment policies can be substantially transmitted to the level of new construction starts, the speed at which infrastructure funds are in place and the amount of physical work, whether the prosperity of the manufacturing industry (especially the export sector) can continue, and the degree of market confidence recovery." Zhang Qiusheng suggested that steel companies and steel traders should still focus on refined operations, product structure adjustment, strict cost control, and risk management.
