Analysis of steel prices in the first half of 2011 - two

As an industry that has been languishing for a whole year in 2010, the market for the steel sector in the first half of this year was dubbed the “Mummy Resurrection” in the industry. In the second quarter, steel prices were significantly increased in the traditional consumption season, coupled with improved exports, steel mill capacity was fully released, and the industry boom improved. However, after the arrival of the rainy season and the gradual manifestation of the cumulative effect of the tightening policy, steel prices entered the downtrend channel.

The industry believes that the biggest focus of the steel industry in the second half of the year is the progress of the construction of affordable housing. If the social housing project can be promoted as planned, the construction steel (4808, 7.00, 0.15%) will have a phased shortage of production capacity and usher in the high point of the industry. According to the latest crude steel output statistics of China Steel Association, the national crude steel output reached 2.02 million tons in the second half of June, surpassing 2 million tons for the first time in history. According to industry analysis, steel production capacity has expanded rapidly during the off-season. The biggest possibility is that the demand for construction industry is beginning to show.

The peak season effect is highlighted in the first half of the year

In the first half of this year, steel prices fluctuated twice. In the first quarter, steel prices rose first and then fell. After March, with the gradual arrival of the peak demand season, the steel market entered the stage of continuous destocking in the second quarter. At the same time as domestic demand increased, the international market also made a force, and the steel industry ushered in a booming economy.

In mid-May, the construction steel boom reached its highest point since October 2008. At that time, the profit rate of steel per ton exceeded 300 yuan/ton, and the profitability of construction steel was better than that of sheet metal, which stimulated large and small steel mills to release production capacity. According to the survey, the capacity utilization rate of steel mills in the second quarter generally reached over 90%, and the daily output of crude steel broke through 1.95 million tons, a new high.

In the case of booming production and sales, last year's “crouching” research institutions began to re-active, extensively research and recommend the steel sector. Whether it is “valuation repair” or “trend market supported by industry fundamentals improvement”, the steel sector achieved overall performance in the first half of the year.

However, after mid-May, as the austerity policy continued to increase, the cumulative effect led to a decline in downstream industry orders, including automobiles, hardware, machinery, etc., and steel demand began to shrink. Small household appliances and hardware manufacturers in Guangdong even stopped production more than half. At the same time, the limited production of electricity finally proved that there was no substantial impact on the steel industry, and the expectation of a decline in supply did not materialize, leading to a decline in the price of sheet metal products. Subsequently, the southern region also entered the rainy season, construction steel demand began to bear pressure, steel prices entered the downward channel in June.

Second half or pulsed market

According to previous years' experience, the hot weather in the third quarter is the traditional off-season of the steel market, but this year it is likely to be different from previous years because of the construction of affordable housing. It can be said that under the current macroeconomic situation, affordable housing has almost become the only bright spot in the steel market in the second half of the year, and its release intensity and rhythm are very crucial. According to the previous public data, the overall operating rate of the national affordable housing is only about 30%. Under the “big limit” that the Ministry of Housing and Urban-Rural Development must start full-scale at the end of November, the housing projects in the third quarter will face a concentrated construction. This means that, next, construction steel with rebar and wire (4729, 0.00, 0.00%) will be expected to usher in a period of demand explosion.

“Starting the work” means starting the construction of foundations, and the amount of foundation steel bars accounts for about 50% of the total. Qilu Securities estimates that according to statistics on the start-up plans of the provinces, the new construction area of ​​affordable housing in 2011 will reach 640 million square meters. If the starting rhythm is in line with expectations, the daily consumption of crude steel in the third quarter will exceed 100%, which constitutes a potential shortage of production capacity, and the industry has opportunities for profit recovery. This may form a “pulsed” market, and companies with a focus on construction steel production are expected to usher in a profitable high.  

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