Since January of this year, China’s domestic average daily average crude steel output has remained at a high level of over 1.9 million tons. In April, the average daily average crude steel output hit a record high of 1.968 million tons.

Against the background that steel production remained at a high level, the contradiction between supply and demand in the steel market has not been stimulated. From March till now, steel stocks have been declining weekly and destocking has continued to be stable. Domestic steel prices also started in early May and started in October 2008. The new high since.

According to industry sources, the easing of contradiction between supply and demand has benefited from the recent domestic demand and the support of foreign exports. However, under the background of the record high steel output, both domestic demand and foreign exports will be under pressure. With the increasingly urgent calls for elimination of backwardness and power cuts, the trend of the steel market will mainly depend on the game between supply and demand.

April crude steel production hits new high inventory levels

Since January of this year, China's domestic average daily crude steel output has remained at a high level of over 1.9 million tons. According to the latest statistics from the Bureau of Statistics, China’s domestic crude steel output in April was 59.03 million tons, an increase of 7.1% from the previous month, and was converted into an average daily output of 1.968 million tons, a record high.

However, under the background that steel production remained at a high level, the contradiction between supply and demand in the steel market has not been stimulated. According to relevant data, since the beginning of March of this year, the inventory of steel traders’ hands has dropped by weeks, and there has been a continuous “de-inventory” phenomenon.

According to the statistics of mysteel stocks, the total inventory of the top five steel products (ie, rebar, wire rod, hot-rolled, cold-rolled, and medium-strength) appeared at a high of 18.9 million tons on March 4. Inventories are declining every week. As of May 6, the total inventory of the five major species fell to 15.306 million tons.

Along with the continued destocking, domestic steel prices also hit a high level since October 2008. According to the myspic steel composite index compiled by mysteel, on May 4, the domestic steel day index was 178.7 points, which was the highest since October 2008.

Where did the steel output go? "Internal Needs + Exports" Improve Supply and Demand

Some market participants are puzzled about the high output of steel production, the continuous destocking of the steel market and the rise in steel prices. “The market is still destocking and steel prices are rising recently. Then the steel output that has remained at a high level since January this year. Where is it?"

Yu Lianggui, editor-in-chief of Mysteel Information, said that the release of the downstream steel market demand and steel exports in the near-term phase is the main reason why the contradiction between steel supply and demand has not yet intensified.

According to the latest economic data, from January to April, China's fixed asset investment was 6271.6 billion yuan, an increase of 25.4% year-on-year, an acceleration of 0.4 percentage points from January to March, of which growth in real estate development investment was also 34.1% from January to March. It rose to 34.3% from January to April.

“The strong growth in investment has ensured the demand for the “Jinsanyinsi” steel market, and most of the steel production has been digested,” explains mysteel analyst Chen Jingfu. “At the same time, steel stocks are currently scattered in small and medium-sized cities and ports. This is To a certain extent, it affects the accuracy of the destocking rate."

In addition, the latest customs data show that in April China exported a total of 4.77 million tons of steel, which was a decrease of 140,000 tons compared with March, but it increased by 10.67% compared with the same period of last year. From January to April, it had a total export of 15.28 million tons, a year-on-year increase of 17.4%.

A trader in Guangzhou commented that “in April, the export volume of steel reached 4.77 million tons, although there was a slight decline from March, but from the perspective of annual export volume, this figure is still quite 'business'.”

The trader continued to say that, however, under the backdrop of a record high crude steel production in April, demand and exports from the steel market will be under pressure. The future trend of the steel market will mainly depend on the game between supply and demand.

In response to the news of a record high output of crude steel in April, the recent arguments for overcapacity in steel production were revisited by people in the industry.

On May 10, the Ministry of Industry and Information Technology indicated that it has decomposed the targets of eliminating backward production capacity in 18 industrial sectors in 2011 and reached various locations. Among them, the target of ironmaking industry is 26.53 million tons, and the steelmaking industry is 26.27 million tons. In 2010, the targets for eliminating backward production capacity in the iron and steel making and steelmaking industries were 35.246 million tons and 8.764 million tons, respectively. The elimination of outdated steelmaking capacity has obviously increased.

Earlier, the Ministry of Industry and Information Technology also issued a document saying that the central government will allocate special funds for the elimination of backward production capacity in some regions. Among them, 200 m3 or more blast furnaces in the ironmaking industry, and 20 tons or more converters and electric furnaces in the steel-making industry are all within the central government's award.

However, at the same time as eliminating outdated production capacity, there is still a considerable amount of new capacity to put into production in China. According to incomplete statistics of my steel network, in the iron-smelting industry, the capacity of blast furnaces newly added and put into operation in China was 29.58 million tons in 2010. From the beginning of this year to now, the capacity of blast furnaces newly added and put into operation in China is about 10.28 million tons; in the ironmaking industry, In 2010, the capacity of converters newly added and put into operation in China was 32.03 million tons. Since the beginning of the year so far, the capacity of newly added converters has reached 6.8 million tons.

At the same time, the market is expected to be able to reduce the growth of steel production to a certain extent, and to ease the contradiction between supply and demand in the steel market. A record high of crude steel production in April broke this expectation. Recently, there were market news that recently some small steel mills in Hebei Province have recently been affected by power curtailment, and production has been suspended for several days. Although local large steel mills do not report power curtailment at the moment, because the current power restriction involves Hebei This province of steel production is expected to have a substantial impact on steel production.

It is understood that in 2010, the government's measures to eliminate backwardness and power cuts and other measures had once restricted the release of steel production capacity and production, improved the supply and demand relationship in the steel market, and formed favorable support for the steel market at that time. This continues to rise more than six months.

Demand: Domestic demand and exports will be under pressure

In the first quarter of this year, steel production has the support of domestic demand and exports. However, insiders said that with the new high crude steel production in April, the pressure on the two major sectors is gradually emerging.

Chen Jingfu said that from the market inventory data, the recent market destocking efforts less than the previous period. That is, with the upward movement of steel prices, the willingness of the steel downstream steel industry to accept current steel prices is weakening.

In addition, mysteel analyst Tang Hao said that the export volume in April was mainly supported by orders in March. Along with the past “Jin Sanyin IV” period, foreign demand will weaken, and at the same time foreign countries’ “anti-dumping” of steel products in China. The call is tight, and the support of the steel exports to the domestic steel market in the later period may tend to ease.