A new cycle of rising steel industry may come

As the three major demand engines pull, global steel production gradually picks up, and stimulates the price of smelting raw materials, steel industry chain, downstream demand and macro environment generally warm up, all of which may mean that the steel industry will enter a new rising cycle. In this regard, relevant parties must have corresponding preparations and countermeasures.
The first four engines will drive demand and form a solid foundation for a new cycle. The formation of a new rising cycle in the industry must have a demand base that continues to grow vigorously in a number of years (such as 5 to 10 years). Langke Steel Chen Kexin believes that there are four main engines that can drive the steady and steady growth of steel demand at present and in the future:
The first is that the state approved investment projects have entered a large-scale start-up phase. So far, the fixed assets investment projects intensively approved by relevant departments have reached 2 trillion yuan. After multi-channel financing, construction preparation, inspection and supervision, and introduction of PPP mechanism, especially the national producer price index (PPI) turned positive, many industry investments began to be profitable and other forces, China has approved investment projects to begin Entered the stage of large-scale construction. One of the signs is that infrastructure investment has grown substantially. In the first nine months of 2016, the nation's infrastructure investment increased by 19.4% year-on-year, far higher than the overall growth rate of fixed asset investment, and set a new high in infrastructure investment growth in recent years. The second sign is that the new construction area has increased significantly. In the first nine months of 2016, the total investment for the newly started projects in the country is 367.63 billion yuan, an increase of 22.6%. The third sign is the substantial increase in sales of construction Machinery. According to statistics, in August 2016, the national heavy truck sales increased by 45% year-on-year, and remained high in September. According to the survey of China Construction Machinery Business Network, the sales of construction machinery nationwide has increased significantly this year. Among them, excavator sales in September have increased by 71% year-on-year. Langke Steel Chen Kexin believes that the sales of heavy construction trucks, excavators and other construction machinery are strong and even hot, showing a significant increase in engineering start-up projects.
        Secondly, 100 million people entered the city. According to the national development strategy, more than 100 million rural people will enter the city to settle in the future, and tens of millions of people will be evacuated from the inaccessible deep mountainous areas and barren areas, resulting in large-scale urban construction, including housing construction and cities. Infrastructure construction and inter-city transportation construction. Langke Steel Chen Kexin believes that even if the investment cost per person enters the city is 300,000 yuan, 100 million people need to invest 30 trillion yuan in various types of investment, which results in an amazing demand for investment products, including various steel demand. There are no billions of tons.
        Once again, it is the construction of the “Belt and Road”. Including developed countries, there is currently a huge historical debt in global infrastructure construction. GIH believes that the global infrastructure investment required in the future will be more than 50 trillion US dollars. To this end, the “One Belt and One Road” construction has followed suit and has now been incorporated into the national grand strategic planning and deployment. Langke Steel Chen Kexin believes that it has great potential for investment, especially for infrastructure investment, even if there are conservative estimates. The scale of 10 trillion yuan (RMB). The “One Belt, One Road” investment and construction is characterized by the interconnection of transportation, communication and energy. It will be first launched in neighboring countries in China, and then gradually extended to countries in the far-distance countries, including Western countries such as Europe and the United States, such as the construction of a global high-speed railway network. Building a global railway freight network and building a global oil and gas network. With the development of the “Belt and Road” investment, China's overseas contracted construction projects will increase, and the demand for construction steel and construction machinery steel will increase accordingly.
        Finally, the global astronomical number "hot money" is eyeing. The commodity market is, in a sense, also a capital market. After the world financial crisis in 2008, the governments of the world's major countries over-received large-scale currency, and the accumulation of super-currency currency in the world continued to form an astronomical “hot money” in the commodity market. Research from BlackRock, the world's largest asset management company, shows that global investors currently hold more than $50 trillion in cash, more than the top four global economies in the US, China, Japan and Germany (less than $40 trillion) ), more than double the balance sheet of the world's major central banks. Langke Steel Chen Kexin believes that these funds have gradually entered the steel and black series of commodity markets, which has a great effect on the formation of a new rising cycle in the steel industry.
        Most of the above fixed assets investment belongs to infrastructure construction projects, such as high-speed rail, underground pipe gallery, urban rail transit, environmental protection, etc. The construction of the project requires more construction funds, long construction time, and its steel consumption and construction machinery use. Significantly higher than the general investment project. Langke Steel Chen Kexin believes that with the gradual and large-scale start-up of investment projects approved by the state, it will inevitably lead to sustained and strong growth of demand for Chinese steel entities, which will not end in a short period of time, and demand release lasts for more than five years. Even for 10 years, the total demand for various types of steel will reach billions of tons, or even tens of billions of tons, enough to support the realization of a new cycle of the steel industry. In addition, the liquidity accumulated by the central banks' super-currency currencies is not likely to be absorbed and absorbed in a short period of time. The huge demand for financial purchase of steel and black series products has also existed for a long time, thus laying a new demand-oriented rise in China's steel industry. A solid foundation for the cycle.
        Recently, the global PMI index, including China, has rebounded together, and the demand for steel downstream industries is improving. It does indicate that the new rising cycle of the steel industry is opening. According to survey statistics, in October 2016, China's manufacturing purchasing managers' index (PMI) was 51.2%, up 0.8 percentage points from the previous month, and rebounded significantly above the critical point, hitting a new high in July 2014. The statistics of China Federation of Iron and Steel Logistics Professional Committee also showed that the steel industry PMI index was 50.7% in October, up by 1.2 percentage points from the previous month, and the industry sentiment returned to the expansion range, setting a new high of nearly five months. Not only that, in September 2016, the global JPMorgan Global Manufacturing Purchasing Managers Index (PMI) was 51, which also hit a high level in 2016 and showed a continuous upward trend. Among them, the UK PMI reached a 27-month high, the euro zone PMI rose to 52.6, the US PMI rose to 51.5, the Russian PMI rose to 51.1, and Austria rose to 53.5. In the Asian market, Vietnam rose to 52.9, Japan and Indonesia rose to 50.4 and 50.9 respectively, and India's PMI index was 52.1. In October, the Eurozone's comprehensive PMI hit a 10-month high of 53.7. Langke Steel Chen Kexin believes that manufacturing is closely related to steel consumption, and the global PMI index continues to rise. It is undoubtedly good news for the steel industry to start a new cycle of rising.
Second, steel output growth and exports continue to increase, becoming a strong proof of the rising cycle
        Only when there is demand can there be production, and then there can be export trade. Langke Steel Chen Kexin believes that it is driven by the growth of consumer demand, so domestic and international steel production has continued to grow since 2016. According to statistics, from January to September 2016, national steel output increased by 2.3% year-on-year, and crude steel output increased by 0.4%. Among them, the national steel output increased by 4.3% in September, and the crude steel output increased by 3.9%, completely reversing the slowdown or even the decline in steel production for some time. At the same time, world steel production has also rebounded. According to the World Iron and Steel Institute (WSA), in September 2016, global (66 steel producing countries (regions)) crude steel production was 133 million tons, an increase of 2%. Among them, India's crude steel output increased by 8.5%, entering a rapid growth channel. From the perspective of world crude steel production in each month of 2016, the year-on-year growth rate has increased from 7.1% in January to 2% in September, and its monthly recovery trend is obvious. To this end, worldsteel has adjusted the global steel demand forecast for this year and next. It is believed that “global steel demand is passing through the bottom of the current cycle,” and global steel demand in 2016 will be reduced by 0.8% from the previous forecast to 0.2%, up by 1%; and global steel demand in 2017 will be adjusted to The growth rate was 0.5%, and the growth rate was further improved.
        Demand growth has boosted the prosperity of import and export trade. Affected by this, China's steel exports in the first nine months of 2016 reached 85.12 million tons, a year-on-year increase of 2.4%, exceeding the global crude steel production growth rate. Lange Steel Chen Kexin expects China's annual steel exports to exceed 100 million tons is a foregone conclusion. Quantity size. If we consider that there is not more than the same amount of indirect exports, in 2016 China's total crude steel exports (steel export volume, the same below) will reach 200 million tons. Due to the global demand growth driven by the recovery of the world economy, China's steel exports will further increase in the future, and its direct steel export volume will reach or approach 200 million tons.
        The domestic and international steel market is a whole. While China's steel demand is growing steadily, global steel demand is gradually improving, which also indicates that a new rising cycle of the steel industry is forming and coming.
Third, various cost factors generally rose, helping the steel industry to rise in a new cycle
        The industry cycle requires that the entire industry chain commodity and macroeconomic environment advance and retreat together, so it is closely related to the upstream cost trend. Langke Steel Chen Kexin believes that overall, the low-cost era of various cost elements of steel has come to an end, and will continue to rise for several years in the future, which will promote the continued rise of steel prices at home and abroad, and give birth to a new rising cycle of China's steel industry. .
        Smelting raw materials and energy costs tend to rise. After entering 2016, the prices of steel smelting raw materials such as coke and iron ore have risen sharply, and the price increase at the beginning of the year has generally exceeded 30%, even reaching 50%. The prices of oil and natural gas, which are closely related to the energy and power of the steel industry, have also risen by about 30%. Lange Steel Chen Kexin expects that the future price of steel smelting raw materials and energy will be relatively high, and there is still room for growth. The price of imported iron ore to the shore exceeds 50 US dollars. The World Bank predicts that global energy prices such as oil and coal will increase by 25% in 2017. With the consumption of raw materials and energy purchased at a low price in the early stage, in the future, steel companies will start a rising cycle of smelting raw materials and energy and power costs, and there will be a continuous rise.
        Logistics costs tend to rise. The new policy of automobile transportation, which began on September 21, 2016, drastically lowered the approved load of large trucks, which will enable steel companies to purchase raw materials for freight. In addition, the relevant departments have raised the price of refined oil products several times in 2016. Langke Steel Chen Kexin believes that with the continued increase in oil and gas prices in the international market in 2017, domestic refined oil prices will be further increased, and the logistics costs of steel companies will continue to increase in the next few years.
        Environmental protection costs are rising. Now some steel companies are far from the national environmental protection requirements. In the future, the regulatory authorities will be stricter in environmental law enforcement, and the threat of shutting down production will force steel companies to substantially increase their environmental protection expenditures. The increase in the cost of repaying historical debts will continue for a long period of time.
        Exchange rate costs tend to rise. Since 2015, the exchange rate of the RMB against the US dollar has continued to depreciate. Recently, the central parity of the RMB fell below the 6.7 mark, a new six-year low. So far, the cumulative depreciation of the RMB index has exceeded 3%. Due to the slowdown in China's economic growth, the decline in foreign exchange reserves, and the expected impact of the Fed's continued interest rate hike, coupled with the optimism of the competent authorities and tolerance of a wider range of exchange rate fluctuations, it is expected that the renminbi will depreciate in the future. Langke Steel Chen Kexin believes that although there is no basis for the continued sharp depreciation of the RMB, although the scope of continued depreciation is limited in the future, although the competent authorities will not actively depreciate the local currency, the depreciation of the RMB has objectively increased iron ore, Crude oil, coking coal, scrap steel and other smelting raw materials and energy import costs.
Fourth, the macro economy stabilizes to provide a new cycle environment for the steel industry
        The big environment determines the microclimate. Langke Steel Chen Kexin believes that the new rising cycle of China's steel industry has formed and arrived, and it is closely related to the stabilization of domestic and international macroeconomics. According to the National Bureau of Statistics, the growth rate of China's economy in the third quarter of 2016 was 6.7%, which was the same as that in the first and second quarters. From the ring, the GDP in the third quarter increased by 1.8%. It is expected that the steady growth policy will continue to be exerted in the fourth quarter, and the economic growth rate may be higher than the level of the previous three quarters. This shows that the macroeconomic growth rate has begun to stabilize. It is worth noting that in 2016, China's economic growth momentum began to change, and household consumption began to become the dominant engine. Statistics show that in the first three quarters of 2016, from the contribution rate of investment, consumption and net exports, the contribution rate of consumption to economic growth was as high as 71%, an increase of 13.3 percentage points year-on-year. This will make the Chinese economy stabilize and pick up momentum will not disappear in a short period of time, but has a solid foundation for a good structure.
        Since 2008 after the financial crisis, although the growth rate of the world economy has been slow, it has not left the recovery track with the assistance of extremely loose monetary policy. Beginning in 2015, the US economy's important engine, the US economic recovery, was relatively strong, so the Fed began an exit process of extremely loose monetary policy. After stopping the QE purchase, the Fed raised interest rates for the first time at the end of 2015, and it is very likely that it will raise interest rates again in December 2016, and will raise interest rates several times in the future. Langke Steel Chen Kexin believes that the Fed’s interest rate will gradually return to normal levels. Without serious misjudgment, it certainly shows that the US economic outlook is promising, promoting the recovery of the world economy and increasing the demand for various commodities, not the other way around. The Sino-US economy has once again turned to a stable and stable trend, which will lead to a further recovery of the global economy, which will inevitably lead to a promising prospect of steel demand and create a new environment for the steel industry to rise.
5. The new rising cycle is slower.
        The new rising cycle of China's steel industry is slow and the twists and turns are difficult. The biggest constraint is the huge domestic steel production capacity. Langke Steel Chen Kexin believes that with the medium and short-term factors, as steel prices continue to rise, some high-cost enterprises will gradually lose profits and get profitable. The profitability will inevitably stimulate related enterprises to increase production, which will bring huge pressure on the market. The world's mining giants are expanding their output. In 2017, Brazilian mining giants Vale and RoyHill will have more than 100 million tons of new iron ore production capacity, which will undoubtedly increase production capacity pressure. In addition, the strong dollar's restraining power for steel and the entire black series of goods can not be ignored. Even so, more factors are good, especially the positive factors have long-term, and it is still worth looking forward to pushing the new rising cycle of China's steel industry. (Lange expert Chen Kexin original article, please indicate the source)