In the face of overcapacity and insufficient demand, the industry environment of high cost of falling materials, steel prices continue to fall in 2023, resulting in a sharp contraction in the profits of steel enterprises, although exports and other aspects of the market growth, but the overall market supply and demand pressure is still more obvious. At the annual meeting of China's steel market Outlook and "My Steel" held over the weekend, participants said that in 2023, China's steel consumption structure continues to optimize, the proportion of steel consumption in the manufacturing industry continues to increase, and the steel market shows strong resilience, but the profits of the steel industry continue to narrow, and the industry profitability is close to the historical bottom. It is expected that the demand of some market segments will continue to improve in 2024, but the decline trend of the total demand in the future will remain unchanged, and steel companies are still facing greater operating pressure.
2023 Steel consumption structure changes steel profits are almost at the bottom of history "2023 steel industry (smelting and rolling processing) sales profit margin in the main industrial industry is the last, the steel industry loss area has also greatly expanded, tons of steel profit is very small, almost the worst level in history." Wang Jianhua, chief analyst of steel at Shanghai Steel Alliance E-commerce Co., LTD., summed it up when he reviewed the industry operation in 2023 at the China Steel Market Outlook and "My Steel" annual meeting. Wang Jianhua said that it is pleasant to see that the demand in 2023 does not include the 20-30% decline that professionals say all year round, according to the statistics Bureau and customs data from January to October, the annual apparent consumption of crude steel is about 942.96 million tons, down 2.2% year-on-year; If according to the January to October data of PTDY and customs, the annual apparent consumption of crude steel is about 998.23 million tons, an increase of 1.8%, and an increase of 3.5% compared with the consumption calculated by the Statistics Bureau and customs in 2022. What is really exciting is that the growth rate of steel exports (up 35.6% in the previous November) is significantly better than the performance of domestic demand, which greatly alleviates the domestic supply pressure.
From the perspective of various market segments, the consumption structure of the steel market in 2023 has changed significantly, and the supply and demand of construction steel have declined significantly, but the demand for plates such as medium and thick plates and automobile plates has increased. Shanghai Steel Union steel business group construction steel analyst Wan Chao analysis, 2023, due to the increasingly clear international situation, the lack of domestic industry favorable policies, investment flow began to change significantly, manufacturing is stronger than infrastructure is stronger than housing. This is mainly reflected in the construction steel market cost is high for a long time, the profit margin is low for a long time, the production profit of rebar enterprises is worse than that of last year, and the construction steel trading volume is improved compared with last year. The cumulative production of rebar fell sharply year-on-year, and the total inventory of rebar fell 1.26% year-on-year, and the warehousing margin exceeded expectations. In 2023, the largest demand reduction in the steel industry is in construction steel, and the largest domestic increase is in the medium and thick plate market. Shanghai Steel Union thick plate analyst Yang Xue said that 2023 thick plate price performance is relatively bright, hot metal tends to produce better profit thick plate varieties. Under the pull of good orders on the variety board plus exports, consumption has strong resilience, and the effect of warehouse is significant, market sentiment has improved slightly, price volatility has intensified, and the stimulus of the superimposed production restriction policy will still change the supply and demand pattern, and the profit space has expanded.
However, from the perspective of the whole industry chain, the profit distribution of the upper and lower reaches of the steel industry in 2023 is uneven, and the steel enterprises have not obtained the profit space they should have in the entire industry chain. "Chinese steel companies have 'fattened up' overseas mines, subsidised overseas downstream users and suffered themselves." Wang Jianhua summed up the overall operation of the steel industry chain in 2023. In 2023, due to exports exceeding expectations, the overall production of steel did not decline significantly, driving a double increase in iron ore supply and demand. Driven by macro expectations and high destocking speed, iron ore prices are high, while coking coal prices are also at historic highs. The profit of the steel industry chain is eaten by the upstream raw fuel, and the profit of steel enterprises is meager. Some insiders believe that the imbalance between supply and demand is the main reason for the current operating difficulties of steel enterprises. Zong Weidong, deputy general manager of Shaanxi Iron and Steel Group Co., LTD., called on steel enterprises to actively respond to the call to promote industry self-discipline, reduce disorderly competition and non-essential hemorrhaging production.
In 2024, it is expected that the overall operating pressure of steel enterprises is still large or that the steel market demand in 2024 will improve in some areas. On the one hand, the steel used in the ship market will continue to grow, of which 304 stainless steel sheet, high-strength low-temperature steel, crack plates for large container ships, including nine nickel steel and high manganese steel, will continue to increase. Tan Naifen, deputy secretary general of China Shipbuilding Industry Association, said: "At present, the first orders of mainstream shipyards are basically scheduled to 2027 and 2028, and shipowners order a large number of dual-fuel vessels that meet the requirements of green environmental protection to promote the growth of ship demand. Based on this, it is expected that ship steel will continue to maintain stable growth in the next 3-4 years, with an annual steel volume of 13.5-14.5 million tons." The overall demand for the medium and thick plate market will also continue to increase. Yang Xue looked forward to the industry demand in 2024, said that in the country to vigorously promote prefabricated buildings and new energy power generation and other fields, the economy has greater recovery potential and a large number of infrastructure investment land, the project is rushed to work, it is expected that in 2024, the construction machinery industry will recover slightly at the bottom, the steel structure will grow steadily, the shipbuilding industry will rise slightly, and the industries related to infrastructure and new energy. The demand for medium and thick plates is a small positive drive.
Thanks to the development of infrastructure construction and prefabricated residential construction, as well as the promotion of steel structure, steel structure market demand is also on the rise, Liu Yi, executive vice president of the China Steel Structure Association, said that according to the China Steel Structure Association, by 2025, steel structure processing is expected to reach 140 million tons; By 2035, the processing volume of steel structure is expected to reach 200 million tons. Wang Jianhua is expected to double the supply and demand of the domestic steel industry in 2024: on the supply side, it is expected that the crude steel production in 2024 will increase slightly by 1 million to 5 million tons (compared with the data of the Bureau of Statistics 1,028 million tons), and on the demand side, it is expected that the crude steel demand in 2024 will increase slightly by about 19 million tons (based on the data of the Bureau of Statistics). From the structural point of view, 2024 will continue to be optimistic about the growth of steel demand for new energy, steel structure, shipbuilding and other industries. In terms of exports, which will increase the most in 2023, due to the increased inhibition of overseas anti-dumping, carbon tariffs, investigation and payment trade, and increase in overseas supply, Wang Jianhua is expected to reduce the direct export of steel by 10 to 15 million tons in 2024.
The majority of practitioners still have a conservative view of market demand in 2024. Xia Xiaokun, co-president of Shanghai Steel Union, said that according to the results of the previous survey questionnaire of Shanghai Steel Union, the proportion of real estate steel demand is close to 70%, and most of the respondents believe that the industry may reduce production in 2024. Zhang Qiusheng, chief analyst and senior engineer of Nanjing Iron and Steel Co., LTD., expects that the steel price center will move down slightly in 2024. It is expected that the average price of rebar is 3900 yuan/ton, and the interval is 3500 yuan/ton -4400 yuan/ton. Hot coil is expected to increase 100 yuan/ton on the basis of thread. Raw fuel costs will remain high, and it is expected that another 50% of steel mills may be in the red next year. Huang Jianzhong, senior manager of strategic planning Department of China Baowu Iron and Steel Group Co., LTD., believes that there is overcapacity and mismatch between supply and demand in the steel industry, and the interference of policies should be appropriately reduced to let the market play a role. 2024 is expected because the economic Work Conference proposed a series of policies to stabilize growth next year; The industry will guide the industry production self-discipline; The Fed will start easing monetary policy. Steel costs will not fall significantly this year, but the capacity of the downstream industry has improved relative to this year.
