Steel prices are expected to rebound slightly in the second quarter

The recent steel industry's exports have fallen sharply year-on-year, but the chain has stabilized. At the same time, the country raised the export tax rebate rate for some steel products and played a positive role in the future steel exports. According to the China Securities Journal, steel prices have lost money again after the second bottoming, but this has formed support for steel prices. From the perspective of future export situation, downstream demand and current cost support, the industry has basically bottomed out and it is expected that the steel price will rebound in the near future.

Both output and exports fell

China Iron and Steel Association annual output report shows that in early March 2009, the average daily output of crude steel fell by 130,000 tons. In the first half of this year, the average daily crude steel production of the country was 1.378 million tons, which was a decrease of 132,000 tons from the average daily output of 1.51 million tons in late February. This is the first time that the average daily output of crude steel has fallen by the end of this year. This is also the result of the price reduction of steel mills once again reduced production. Due to the reduction in production and the high base in the same period of 2008, the output of crude steel in March 2009 is expected to increase year-on-year, and will change from positive growth in January to February to negative growth.

Affected by the exchange rate and the drop in foreign demand, domestic steel exports have rapidly declined. Exports of steel in February were only 1.56 million tons, down 50% year-on-year and 18% lower than the previous month. In February, the net export of domestic crude steel (steel + billet) was only around 200,000 tons. The export situation is grim.

According to the latest statistics from the Customs, China exported 1.67 million tons of steel in March, an increase of 120,000 tons compared with February. Although it decreased by 59.76% year-on-year, it also rose by 7%. The net export of steel products in March was 400,000 tons, which was better than market expectations. Although the European Union and the United States recently wanted to conduct anti-dumping investigations on certain domestic steel products, the quantity of steel currently exported to the United States and the European Union is very small (total 10-20 million tons/month), and anti-dumping will not cause further deterioration of exports.

In the second half of 2008, with the exception of Japan, the currencies of major steel exporting countries depreciated against the U.S. dollar to varying degrees, while the renminbi maintained a relatively stable exchange rate with the U.S. dollar, resulting in a significant cost advantage for China’s steel products in foreign markets. decline. The loss of low-cost advantages as a core competitiveness is the main reason for the recent sharp drop in exports.

Low prices and high cost performance are the core competitiveness of domestic steel exports. However, due to sharp fluctuations in exchange rate fluctuations and scrap costs, the large price difference for foreign products in 2008 is no longer making domestic steel companies lose their competitiveness in export products. This is also the main reason for the sharp decline in boom export.

Price is expected to rebound slightly

First of all, the RMB exchange rate may follow the depreciation of the US dollar, which is conducive to steel exports. According to the macroeconomic research team of CITIC Securities, the strong US dollar at the end of 2008 will be unsustainable, and the US dollar will weaken relative to the currencies of emerging markets and commodity exporting countries. In fact, currencies such as the rupee and the won and the won and the dollar have been released from the trend of devaluation again and again, and have appreciated in the recent past. If the renminbi keeps a relatively stable trend with the US dollar, the price advantage of domestic steel products may reappear.

Secondly, there is still much room for adjustment in the future of export tax rebates. This adjustment did not involve the relatively large-scale exports of carbon hot-rolled and plain carbon plate. At present, only a small number of steel products have a 13% export tax rebate. Most of the products have no export tax rebates or have a low tax refund rate. They even impose export duties of 25% and 15% on billet and building materials. Unlike other industries, there is much room for future export tax rebates.

The future situation of steel exports is still very bad. In March, steel exports increased slightly, slightly exceeding market expectations. Although we can no longer recognize the arrival of the inflection point of steel exports, we can at least consider that the export situation may not continue to deteriorate from the previous quarter. If the global economy improves in the future or the export tax rebate adjustment works effectively, Exports may gradually improve in the future.

Finally, cost support. If calculated according to the prices of iron ore 700 yuan/ton (including spot tax) and coking coal 1050 yuan/ton (factory tax included), the pig iron cost will be around 2,000 yuan/ton (excluding tax), plus steelmaking, rolling and Other costs, wire, thread costs should be 2600-2800 yuan / ton, and the current price of wire, thread tax in the 3100-3200 yuan / ton, excluding tax 2650-2735 yuan / ton, in March steel companies to reproduce Loss. Some mills have recently slowed down their pace of production and began to cut production. If the future steel prices continue at the current low level, or continue to test, it will certainly lead to further cuts or stop production.