Shanghai as the representative of the restart of the restart of production, let hope rekindled, but in front of the steel industry is the first four months of the melancholy data.
From January to April 2022, the national crude steel production dropped 10.3% year-on-year, pig iron production dropped 9.4% year-on-year and steel production dropped 5.9% year-on-year. Among them, in April, national crude steel output fell 5.2% year-on-year, pig iron production was flat and steel output dropped 5.8% year-on-year.
Meanwhile, in the first four months of 2022, the growth rate of real estate investment fell by 2.7%, infrastructure investment grew by 6.5% year-on-year, and manufacturing investment grew by 12.2% year-on-year. These are three areas closely related to the “steel demand”, in the market for real estate and manufacturing growth rate is expected to be generally hesitant attitude, infrastructure is pinned on a greater hope.
6.5%, it seems that the growth rate of infrastructure is not bad, but according to the Economic Observer interview, infrastructure currently shows a lack of consumption pulling power. For example, in the interview with the construction machinery companies, they that, at present, the indebtedness of local governments, as well as upstream engineering payments are more common, which makes the investment in infrastructure, even if it is very large, but also need to spend a considerable part to fill the previous project arrears, performance to the data, that is, the infrastructure investment increase is relatively substantial, but the actual pull of infrastructure is relatively limited.
In addition, some brokerage firms believe that the growth rate of infrastructure in January-April, but also can not ignore several factors, the first point is the inflation factor, the first quarter PPI cumulative year-on-year growth of 8.7%, meaning that the actual investment growth rate net of price factors may not be so high. For example, as the main auxiliary materials for road construction, asphalt consumption in the first quarter fell 24.2% year-on-year, while prices rose 22.7% year-on-year. The second point is the seasonal factor, the amount of infrastructure investment in the first quarter as a proportion of the year is generally low (usually no more than 15%), which means that the growth rate is relatively large fluctuations. In addition, from the source of funds, fiscal spending front and special debt power is the key, contributing almost all of the year-on-year increase in infrastructure funding.
Infrastructure, real estate, manufacturing, can support the “steel demand” in 2022?On June 1, the newspaper interviewed steel network researcher Zeng Liang.
Economic Observer: In your judgment, has the steel market started the demand for resumption of work and production after the current round of epidemic?
According to the data tracked by the steel network, with the obvious improvement of the epidemic across the country, the boom index of the domestic steel industry has rebounded, and the operation of the steel industry chain has recovered.
Specifically, in terms of steel production, as of May 25, the start rate of domestic independent electric arc furnace mills tracked by Steel Network was 66.67%, up 3.03 percentage points month-on-month; the start rate of blast furnace mills was 77%, up 0.96 percentage points month-on-month. From the year-on-year perspective, the domestic electric arc furnace and blast furnace steel mills started work fell by 15.15 percentage points and 2.56 percentage points respectively, mainly due to the relatively low profit of steel production, which affected the production enthusiasm of some steel mills. From the steel circulation side, on May 27th, the total amount of terminal steam transported by Fat Cat Logistics statistics rose 2.07% week-on-week, indicating that the steel circulation started to pick up with the gradual recovery of logistics transportation.
In addition, from the steel demand side, with the overall impact of the epidemic on the steel industry in May tends to weaken, the gradual recovery of logistics and transportation, the terminal steel enterprises began to resume work and production, the downstream steel industry boom index rose slightly month-on-month. According to steel research data, the downstream steel industry PMI composite index was 49.02% in May 2022, up by 0.19 percentage points month-on-month.
Economic Observer: For the January-April infrastructure investment growth rate of “color”, on your observations how?
Although the January-April infrastructure investment has achieved a good growth rate, but the current view of infrastructure for steel demand is really not too good, we believe that in addition to the above-mentioned “new debt”, inflation factors and the low base of the first quarter, there are several reasons for the following.
One, although the first half of the infrastructure to support the bottom of the policy to stabilize growth has increased significantly, including moderately ahead of the infrastructure investment, special debt issuance front, local special debt to increase the size of the speed of issuance, etc., but from the policy to the funds in place, and then to the formation of the physical workload of the project on the ground, generally need 6-9 months of the conduction cycle, therefore, we believe that the infrastructure investment in the first half of the year may need to The second half of the year to fully form the physical workload, and thus to form the demand for steel.
Secondly, the epidemic spread in many places in the first half of the year, affecting a longer period of time, leading to a significant slowdown in the construction progress of most infrastructure projects, making this year’s infrastructure construction season has been shifted from previous years.
Third, this year’s infrastructure investment structure has also been differentiated. From the breakdown, January to April, electricity, heat, gas and water production and supply industry investment increased by 13.0%, water management industry and public facilities management industry investment increased by 12.0% and 7.1%, road transport industry and railroad transport industry were up 0.4% and down 7.0%. As can be seen, the traditional infrastructure performance is relatively sluggish, this divergence in the year or will continue, will also bring changes to the steel demand. In the case of modern infrastructure strategic positioning across the board, the new infrastructure such as arithmetic network, data center, intelligent logistics, etc. that are not accounted for may achieve higher investment growth, but the new infrastructure is not obvious for steel demand drive.
Economic Observer: If the “color” of infrastructure in January-April is not enough, then the next, whether the infrastructure in place will have further improvement?
On the afternoon of May 30, the Ministry of Finance requested to speed up the issuance and use of local government special bonds and expand the scope of support, and strive to promote stable growth and stable investment. Overall, the progress of the use of special bonds issued around the overall better. As of May 27, a total of 1.85 trillion yuan of new special bonds have been issued, an increase of about 1.36 trillion yuan over the same period last year, accounting for 54% of the issued limit. And the Ministry of Finance said that provincial finance departments should adjust the special bond issuance plan, reasonably choose the issuance time, accelerate the spending progress, to ensure that the new special bonds this year by the end of June basically issued, and strive to be basically used by the end of August.
From the perspective of infrastructure steel demand, we believe that with the June to the second half of the year, the gradual arrival of funds for the construction of infrastructure projects around the country, infrastructure is likely to be dragged down after the epidemic is effectively controlled to make up for the progress, so we expect that the second half of the year will still have the release of infrastructure projects to catch up with the demand, we expect that in 2022 infrastructure steel is expected to usher in growth. According to the steel demand model measured by Find Steel, the year-on-year increase in infrastructure steel demand in 2022 may be in the range of 4%-7%.
Economic Observer: In addition to infrastructure, real estate is another major consumption area for steel. 2.7% year-on-year decline in real estate investment growth from January to April, but local governments are doing their best to revive the housing market. What do you think of the real estate market’s pull on “steel demand” this year?
Although the real estate regulation policy continues to relax, tight credit also turned to ease, but now the policy transmission on the role of real estate is not too obvious.
From the point of view of real estate sales, January-April real estate sales area fell 20.9% year-on-year, new real estate construction and completion area fell 26.3% and 11.9%, real estate construction area was basically flat year-on-year, the overall performance is still difficult to say optimistic. And then from the real estate land acquisition situation, due to real estate sales and construction still do not see improvement, real estate developers are willing to take poor land, 31 provinces and cities land premiums fell significantly year-on-year, January-April real estate land acquisition area fell sharply by 46.5% year-on-year. Finally from the real estate steel situation, because 2022 January-April real estate sales, new construction, land acquisition overall continue to decline significantly, we expect that the overall demand for real estate steel in 2022 will continue to be in the downward channel. According to the main development indicators of real estate, the demand for steel for real estate in 2022 may drop by 2%-5% year-on-year.
Post time: Jun-08-2022