Steady Growth Investment in the Iron and Steel Industry Should Be Built Inside and Outside

A few days ago, the profit of China's steel production in 2012 was one high and one low. The growth in demand for the steel market slowed down and the ceiling for excess capacity was already within reach. At present, China’s steel industry is facing a severe test. From the perspective of the international environment, the international financial crisis has a far-reaching impact, the world’s economic environment is severely complicated, and the recovery has been a long and arduous one. From the perspective of demand for steel products, the growth rate of investment in fixed assets has declined significantly. The "winter" of China's steel industry has come, and the development of iron and steel enterprises in the later period of industrialization should be "advanced to internal control."

According to statistics, in recent years, there are about 200,000 steel trading companies in China, of which more than 60% have an annual turnover of less than 5 million yuan, and more than 90% of steel trading companies are in the SME category. According to the marketing statistics of key large and medium-sized enterprises' steel products, the main sales methods for steel products in China are direct supply, steel market sales and exports.

From January to November, China produced 660 million tons of crude steel. It is estimated that the annual steel production will be around 720 million tons. According to relevant statistics, China’s steel production capacity is about 900 million tons, while consumption is only about 670 million tons. Supply exceeds demand. The situation is more serious. It is difficult to increase steel consumption significantly next year, and the situation of oversupply will not change much.

At present, China's iron and steel industry has a huge capacity, and irrational expansion capacity still exists. According to preliminary statistics, steel production capacity is expected to increase by 8% in 2013 and the excess pressure will further increase. From this perspective, the internal environment of the iron and steel industry has not yet shown signs of obvious improvement.

At the same time, however, the external environment of the steel industry has gradually warmed up, bringing a glimmer of hope to the steel industry, which is undergoing a difficult transition in the bottom. The iron and steel industry must firmly seize this rare opportunity to improve the quality of its operations and prepare for deeper structural adjustments.

Demand focus: policy-based steady growth investment Since 2009, the downturn of the steel industry, in addition to the cause of excess capacity, has largely come from a significant decline in macroeconomic growth. From January to November this year, China's investment growth rate was 20.7%, which was 3.8 percentage points lower than the same period of last year and 4.2% lower than the previous year.

The situation got better in the second half. Since July, the inventory of manufacturing raw materials has risen month by month. In November, it was again higher than the monthly average of 2012 raw material inventory, indicating that the manufacturing market is expected to improve. From January to November, the growth rate of investment in manufacturing remained stable, with only a slight decline in the past two months. The cumulative annual growth rate slipped from 24.8% in March to 22.8% in November. Some industries also rose. Among them, investment in special equipment manufacturing increased 9.2 percentage points over the same period of 2011. In addition, from January to November, the management of water conservancy, environment, and public facilities increased by 17.2% year-on-year, 2% higher than the same period of last year.

According to the latest report issued by the World Bank, in 2013, China's economic growth rate could reach 8.4%, driven by the acceleration of fiscal stimulus and large-scale investment projects.

The Central Economic Work Conference put forward: “The relationship between maintaining a stable and rapid economic development, adjusting the economic structure, and managing inflation expectations is correctly handled.” In the six major tasks, there is no mention of controlling inflation, and it is clear that steady growth will be given top priority. signal. Among them, the significant decline in economic growth is a major cause, and the reduction in inflationary pressures is also an important support factor. The recovery of China’s overall economic growth is expected to partially improve the external environment of the steel industry.

Zhang Ping, director of the National Development and Reform Commission, said on December 18 that next year will play a key role of investment in economic growth. In 2013, the central budget will invest mainly in areas such as affordable housing and urban infrastructure, agriculture, rural areas, energy conservation and emission reduction, and ecological environmental protection, independent innovation and structural adjustment, and underdeveloped regions. The National Development and Reform Commission approved a large number of infrastructure construction and energy grid construction projects in December, mainly in the central and western regions. According to analysis by the Investment Research Institute of the National Development and Reform Commission, investment growth in 2013 will exceed 2012, reaching about 24%. If the growth rate of investment can indeed reach this level, then the external environment of the steel industry will be much better than this year.

The Central Economic Work Conference also pointed out that we must implement a proactive fiscal policy, improve the structural tax cuts in line with the taxation reform, maintain a moderate increase in the number of people, keep the exchange rate basically stable, and effectively reduce the cost of real economic development. On December 19, the Ministry of Finance and the National Development and Reform Commission announced the abolition or reduction of 30 administrative fees. Structural tax cuts have taken off. We believe that the reduction in market costs will effectively drive the momentum of small enterprises and social investment.

Exports focus on: Market trends in Asia and the United States According to the latest statistical data, from January to November, China exported 5,087,900 tons of steel, an increase of 12.67% year-on-year; exported 5,182,200 tons of that month, setting a new high of the same period since 2009, and 2012 Monthly export changes are relatively stable, and the export situation is relatively stable. According to previous years' experience, the export volume in the last two months has basically remained stable. The total steel export volume in China for the whole year is about 55 million tons. From January to November, the largest market for steel exports in China was ASEAN, which accounted for 26.22%, and cumulative exports for 11 months increased by 48.63%. In the same period, China’s steel exports to the Middle East, the United States, and Africa all showed a significant increase. The cumulative increase in steel exports to the United States was 31.54%, indicating that the US recovery was relatively strong. The decline is more evident in the EU. From January to November, China’s steel exports to the EU-27 fell by 32.19%.

From the perspective of the major economies in the world, the recovery in the United States is relatively stable. By December, the unemployment rate has dropped to 7.7%, a 2.5 percentage point drop from the high point of the unemployment rate in the past three years. The unemployment rate in major European countries rose month by month, with Germany’s unemployment rate reaching 6.9% in October and rising for seven consecutive months. France’s unemployment rate in the third quarter was as high as 10.3%, the highest since 1999; Spain The unemployment rate in the third quarter of countries such as Greece and Greece exceeded 25%. On the whole, the export prospects of EU countries are quite bleak. Therefore, in the future, China's steel exports should mainly focus on the Asian and US markets, while in the Asian market, cooperation with ASEAN must be strengthened in particular.

Long-term focus: Opportunities brought by urbanization In the short term, the most important user industry of steel—the real estate industry is still relatively balanced. In the next few years, the development of the real estate industry will remain an indispensable pillar of domestic economic development. Although the real estate industry has been decelerating for three consecutive years this year, the cumulative increase in real estate investment has shown a monthly increase since July and has increased by 1.3 percentage points in five months, indicating that real estate investment has stabilized. Judging from the tone of the continued strengthening of real estate control that was passed on the Central Economic Work Conference, real estate investment in 2013 will remain stable and there will be no significant rebound. On December 25, the Ministry of Housing and Construction stated that next year it will continue to strictly implement differentiated housing credit, taxation policies, and purchase restriction measures, and resolutely curb the demand for speculative investment housing.

In the next few years, the focus of the steel industry will be mainly on urbanization. The Central Economic Work Conference proposed that urbanization is the historical task of China’s modernization and the greatest potential for expanding domestic demand. The year of 2013 is the first year after the *** convening, and urbanization and economic restructuring will be an important direction for macroeconomic regulation and control.

The promotion of urbanization means the development of urban and rural infrastructure. At present, the first draft of the "Plan for Promoting the Healthy Development of Urbanization (2011-2020)" led by the National Development and Reform Commission has been completed. The plan states that "urbanization will boost 40 trillion yuan in investment in the next 10 years." The plans for the construction of urbanization systems in various places have also been released one after another, among which urban infrastructure construction bears the brunt. Urban infrastructure construction is led by housing construction, various pipeline network construction, urban transportation and power grid project construction. The NDRC's investment approval this year has shown this feature. In the next few years, the construction, renewal, and transformation of urban infrastructure will be the most important investment direction. The government will improve the conditions of the public sector and provide a huge space for residential, commercial, and industrial development. The property of real estate as an investment product will gradually diminish with the large-scale advancement of urbanization.

Luo Baihui pointed out that after the “cold weather” of 2012, China’s economic and investment growth rate is expected to bottom out, thus partially alleviating the contradiction between supply and demand that the steel industry currently faces.

However, under the pressure of huge production capacity, the situation of oversupply cannot be fundamentally improved in the short term. The iron and steel industry is still facing a fierce competitive environment in the context of high output in the coming years.

“The bright spots at the demand level not only can ease the pressure of supply and demand to a certain extent, but more importantly, it gives steel companies the opportunity to accurately grasp the competition situation and do their homework for improvement in variety, quality, and service.” Luo Baihui believes that in this low interest In the period, iron and steel enterprises should develop with the improvement of the quality of steel products, cautious treatment of scale expansion and relocation projects, and development of international development projects.

“The important strategic opportunities for China’s development have undergone great changes in the connotations and conditions of the international environment. The opportunities we face are no longer the traditional opportunities for simple integration into the global system of division of labor, expansion of exports, and accelerating investment, but rather force us to expand. New opportunities for domestic demand, improving innovation capabilities, and promoting the transformation of economic development methods.We must profoundly understand, firmly seize, and make effective use of such new opportunities, take advantage of the situation, follow the trend, and strive to seek greater opportunities in an ever-changing international environment. The national interest," says Luo Baihui.