Where will the stainless steel market go this year?
The government work report proposes that the gross domestic product (GDP) will increase by about 6.5% in 2019. Judging by the changes in China's economic and industrial structure and the trend of steel use in downstream industries, China's GDP per unit of steel consumption will continue to decline in 2019. At the same time, the steel used in downstream industries shows a trend of light weight and green development. The demand for high-strength, high-toughness and corrosion-resistant steel will increase, and the strength of steel for unit products will decrease. According to a comprehensive forecast, the actual consumption of steel in China in 2019 is about 660 million tons, which is generally stable and slightly decreased. At the same time, the government work report proposed that in 2019, it plans to reduce the steel production capacity by about 50 million tons.
Where the supply and demand situation changes, where will the steel market go this year?
Demand for infrastructure steel is strong. According to the government work report, China will actively expand effective investment in 2019: it plans to complete 600 billion yuan in railway construction investment and 1.8 trillion yuan in highway water transportation, start another 15 major water conservancy projects, and continue to strengthen rail transit, civil aviation, and telecommunications infrastructure And other major projects; solidly promote new-type urbanization: co-ordinate urban underground and underground construction, and then start construction of urban underground comprehensive corridors more than 2,000 kilometers; destocking due to the city's policy: plan to complete another 5 million units of shanty town housing reconstruction and continue to develop public rental housing To strengthen the construction of supporting facilities. Compared with the actual completion in 2018, in 2019, China's railway construction, highway water transport investment scale, shantytown housing reconstruction area, and urban underground comprehensive corridor construction mileage are basically the same. It is estimated that in 2019, the construction of China's railways, highways, ports and docks, and urban infrastructure will drive steel consumption to about 104 million tons, which is basically equivalent to 2018, and still maintain strong demand for steel.
The consumption of high-end steel products for equipment manufacturing will increase. The government work report proposes that it is necessary to increase consumption of high-quality products, guide enterprises to increase varieties, improve quality, and create brands, expand the scope of "same line, same standard and same quality" for domestic and foreign products, and better meet the demand for consumption upgrades; vigorously transform and upgrade traditional industries In-depth implementation of industrial strong foundation and major equipment special projects, vigorously develop advanced manufacturing, and promote Chinese manufacturing to move towards mid-to-high end. Judging from this, China's high-end equipment manufacturing industry will achieve faster growth in 2019, providing market support for the transformation and adjustment of the steel industry and the upgrading of product structure. At the same time, the effective supply capacity of the steel industry will continue to improve through the implementation of strong base projects, upgrading and transformation equipment, and accelerated development of intelligent manufacturing and green manufacturing.
Deepening de-capacity in the steel industry is conducive to creating a level playing field. The government work report pointed out that it is necessary to effectively and effectively reduce production capacity, strictly implement relevant laws, regulations and standards such as environmental protection, energy consumption, quality, and safety, and use more market-oriented and rule-of-law methods to effectively dispose of "zombie enterprises" and promote corporate mergers and reorganizations and bankruptcy Liquidation, resolutely eliminate backward production capacity that does not meet the standards, and strictly control the increase of production capacity in excess industries. It is foreseeable that the withdrawal of "Ground Steel" and "Zombie Enterprises" will effectively purify the unfair competition environment of "bad coins expelling good coins" and create conditions for the orderly competition and healthy development of legal and compliant steel companies.
Supply and demand will further improve. Overall, the signals released by the 2019 government work report are positive and favorable for the steel industry and help maintain stable steel demand. At the same time, as China's work to resolve excess steel production capacity is further advanced, the effective supply level of the steel industry will continue to increase, and the market supply-demand relationship will further improve. However, we must see that the challenge of reducing excess capacity is still very large, and the foundation of the industry's good operation is not stable. We must attach great importance to it and continue to promote the de-capacity work.
In 2019, the macroeconomic growth rate will remain stable. The strong advancement of de-capacity policies and the growth of investment in fixed assets such as infrastructure projects will help alleviate the contradiction between supply and demand in the steel market, but the situation of oversupply in the domestic market will be difficult to reverse in the short term. In a complex and uncertain global political and economic situation, trade frictions have escalated and China's steel export resistance has increased. In addition, the uncertainty of the global economy has caused a large amount of "hot money" to enter the commodity market, pushing futures to have an irrational impact on the steel and raw material spot market. Under the combined effect of the complicated internal and external environment, steel prices in 2019 will generally show a trend of operating within a small profit range, but it does not rule out the possibility of irrational fluctuations due to speculative and other unpredictable factors.