Conjecture 1: Crude steel output may exceed 1 billion and hit a record high
Affected by the expected decline in profits, domestic crude steel output again hit a record high in 2019, and the total crude steel production is expected to reach 980 million tons. 2020 will usher in the peak period of production capacity replacement. Since most newly built blast furnaces are "changed from small to large", the new blast furnaces have significantly improved both in terms of production technology and volume ratio. Although the method of reducing replacement is adopted, it is undeniable that the new blast furnaces are even more operational than ten years. Long cycle blast furnaces are even more advantageous. In 2020, the profits of the steel
industry will continue to show a downward trend. The situation of steel companies' profit grabs will still exist. The output of crude steel will exceed 1 billion tons in 2020, setting a new record high.
Conjecture 2: New capacity in the steel industry enters the period of concentrated release
Since 2017, the number of domestic capacity replacement projects has gradually increased. In 2019, the number of newly-produced blast furnaces in China will be small. In 2020, the peak production period will be ushered in. According to Zhuochuang Information, according to public information, there will be 107 million tons of ironmaking capacity and 8250 The 10,000-ton steelmaking capacity has entered into the release period of production. The steel industry's capacity replacement is the 2.0 version of "de-capacity". In the key control areas, the newly-built capacity is placed in the form of reduction replacement. The large-scale development of Chinese steel companies began around 2000. After 20 years of rapid development, the original blast furnace has lagged behind in production technology and production efficiency. The blast furnace has entered a centralized replacement period. s reason. This has also stimulated the investment of the steel industry to a certain extent. In the past three years, the investment growth of the steel industry has increased significantly. One reason for the increase is the addition of new environmental protection equipment and the replacement of equipment. Considering that steel profits have started to decline in the past two years, and the tightening of bank credit policies, the possibility of delaying the commissioning of projects under construction cannot be ruled out.
Conjecture 3: Resilience in real estate demand still exists. Overall demand slowdown is a high probability event.
Real estate is the main downstream of building materials, and the demand for steel bars, cement, and glass is highly dependent on the real estate industry. China's real estate market has entered the era of commercialization since the 1990s and is still within the first real estate cycle. Since 2015, the real estate market has entered a wave of ultra-long bull markets, and the real estate sales area and sales have increased significantly. After entering 2019, the real estate sales area has started to decline significantly. The bull market cycle has ended, but the new housing starts have remained relatively high. The demand for cement, glass and glass varieties has not weakened significantly. In 2020, there is a high probability that the floor space of newly started housing will show a downward trend, but it will still maintain a positive growth. The resilience of the real estate market to demand for building materials and products still exists. Zhuochuang Information estimates that the demand for steel in the real estate market will be about 295 million tons in 2020, a slight decrease from 2019.
Conjecture 4: The merger and reorganization is still accelerating the "13th Five-Year Plan" task is difficult to complete
2020 is the last year of the "Thirteenth Five-Year Plan". According to the experience of previous years, many goals in 2020 must be completed. For the steel industry, capacity concentration may be an important aspect that needs to be improved. Although the state has continued to promote corporate restructuring and adjustment in recent years, the concentration of domestic production capacity has not significantly improved. In 2018, the top ten steel companies in crude steel production accounted for 35.26% of the total domestic output, which is still a long way from 60%. The reorganization of Baowu Iron and Steel in 2019 is a typical domestic restructuring case, but there are no other typical reorganization cases except this case. To achieve the "Twelfth Five-Year Plan" period, 3-5 companies must have strong international competitiveness. There are still large gaps between 6-7 super-large steel enterprise groups with strong strength.
Conjecture 5: Iron ore prices fall at a high level and the price center returns to 18-year levels
Under the influence of Brazil's VALE tailings dam collapse in 2019, the price of iron ore has increased by nearly 80%. Although there was no apparent shortage of market supply, speculation was soaring under the fundamental conditions of the VALE event superimposed by the Australian hurricane season and the rapid decline in domestic port inventory, and the price of iron ore soared to more than $ 120 / ton for a time. From the perspective of iron ore supply and demand, although it is nearing the end of the expansion cycle, it will still be in the global mining expansion cycle in 2020. There is ample supply of iron ore. In addition to the non-mainstream mine's mobile production capacity, the state of excess supply It is still intensifying, not easing; China ’s crude steel output will continue to hit a record high in 2020, but considering the background of the global manufacturing recession, high crude steel output is unsustainable. In addition, new electric arc furnace capacity and the use of scrap steel will also have a certain negative effect on iron ore demand. It is expected that the iron ore price operation center will return to USD 60-70 / ton in 2020.
Conjecture 6: There will still be a wave of rising steel prices in 2020, but the intensity will be weak
The overall price of steel in 2019 continued the downward trend since October 18, and the price fluctuations have significantly narrowed. Since 18 years, the bear market structure of commodities has gradually formed. As a typical cyclical industry, steel prices are subject to cyclic disturbances. A wave of inventory cycles since 2016 is nearing the end, and a new round of inventory cycles will come in 2020. The earliest opening time will be at the beginning of the first quarter and the latest at the end of the second quarter. Therefore, the price of cyclical commodities may be low before and after High trend, although the seventh (since 2000) inventory cycle may be a weak cycle, prices may still have a more obvious rebound. Taking rebar prices as an example, the spot price of the operating hub may fall to 3400 yuan / ton, while futures prices may fall below 3,000 yuan / ton.
Conjecture 7: Spiral Spiral Turns to Positive Rewind Advantage
The price trend of rebar and hot-rolled coil in 2019 is highly consistent, and there are not many opportunities for operating the coil spread. After the steel price fell sharply in November 2018, the spiral snail spread was gradually repaired to the value 0 area, and there was no opportunity for structural long and short spiral snail spreads. From the perspective of demand in 2020, the main downstream automotive industry of hot-rolled coil is still sluggish but there is a possibility of rebounding first, while the main downstream real estate industry of construction steel still maintains toughness but the trend is down. Considering that the expected hype from the capital market is more obvious, it is expected that without major policy changes, the price advantage of hot rolled coils will be significantly higher than that of threads in 2020, but there are still fewer structural opportunities between coils.
Conjecture 8: It is difficult to change the export of steel or to see subtle changes in imports
In the first 10 months of 2019, China's total steel exports totaled 55.087 million tons, a year-on-year decrease of 5.8%. The export of steel products was significantly affected by the deterioration of the foreign trade environment. Although the Sino-U.S. Trade war has had little effect on China's steel exports, the Sino-U.S. Trade war is only one of the symptoms of the deterioration of the global trade environment. Due to the shrinking global manufacturing industry, the growth rate of the total demand for steel continues to decline, and the demand for steel has shown a narrowing trend. In addition, as steel companies in countries and regions such as Vietnam gradually develop and grow, Chinese steel products may face new competitors. In addition, considering the low cost of human resources in Southeast Asian countries, the possibility that some steel (crude steel) flows into the country and competes with domestic steel mills cannot be ruled out.
Conjecture 9: The development of electric arc furnace ushers in a historic opportunity
With the continuous acceleration of the domestic urbanization progress, the domestic scrap steel volume has gradually increased, and the most critical factor for the development of electric arc furnaces is gradually being eliminated. Zhuochuang Information predicts that China's scrap steel resources will gradually shift from scarcity to surplus from 2020 to 2025. This is due to the acceleration of China's urbanization rate. It is expected that China's scrap steel stock will reach 2.5 tons in 2020, which will not only meet domestic demand. Market demand may also lead to larger-scale exports. In recent years, China is undergoing a large-scale steel capacity replacement, with a scale of 159 million tons (crude steel). However, from the perspective of the structure of newly added capacity, blast furnace-converter is still the main component, and electric arc furnaces account for a relatively small amount. As of mid-November 2019, among the announced capacity replacement projects, the capacity of newly-built electric arc furnaces was only 14.32 million tons, accounting for about 9%. From the perspective of policies, resources, and markets, the opportunities for the development of electric arc furnaces are coming.
Conjecture 10: "supply system" of coke or gradually achieve price elasticity or gradually disappear
Coke, as one of the main raw materials of steel, has always been affected by the two ends. Its right to speak is weak in the steel industry chain. At present, the domestic coke market is divided into two types: self-owned coking and independent coking of steel mills, of which the latter has a market share of about 63%. Coal coking is a traditional coal chemical industry with relatively serious pollution. In recent years, it has been one of the key industries controlled by the state. At present, the domestic coking industry is affected by policies such as elimination of coke ovens below 4.3m, dry quenching, and "fixing coke with steel", and is the best basic product among black products in 2020. In particular, once the policy of “fixing coke with steel” is fully rolled out, the right to speak in the pricing of coke may further weaken, and the price bomb will gradually disappear, and there is a possibility that it will be completely reduced to follow the product.